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We face disasters on every front

June 30, 2018 5 comments

from Neva Goodwin and RWER issue #84

The need for reform is huge – seemingly overwhelming. Yet the motives for reform are springing up all over the place. Maybe this is a moment to be a Pollyanna, rather than a Cassandra: Yes, we face disasters on every front – political, environmental, social – but, as was long ago remarked, nothing so concentrates the mind as the prospect of hanging. The public purpose economy is staggering under the need for reform in education and politics, while the core economy is suffering from the lack of decent, secure jobs in a market economy whose inequalities belittle all but the very few who can think of themselves as the winners. No one believed Cassandra, but today there are many who know we face multiple disasters; probably most readers of this article are already suffering from Pre Traumatic Stress Disorder.[1]

Well, you’re not alone; there’s a gathering tide of despair morphing into activism. The time may have come to be, if not exactly cheerful, at least grimly determined, knowing that you are in good company. If we, individually and together – economists, as well as parents, women in general, and all people who care about the future – recognize the deformation of the private business economy as a central piece of dangers facing us, we will be better able to know where to direct our actions.  Read more…

RWER no. 84 – special issue

June 21, 2018 2 comments

Special issue on the public economy and a new public economics

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edited by Michael Bernstein and June Sekera

Reconstructing a public economics: markets, states and societies          2
Michael A. Bernstein          download pdf

There is more than one economy          16
Neva Goodwin         download pdf

The public economy: understanding government as a producer.          36
A reformation of public economics
June Sekera         download pdf

Economic benefits of public services          100
David Hall and Tue Anh Nguyen          download pdf

Bureaucracy shouldn’t be a dirty word:
the role of people-responsive bureaucracy in a robust public economy          154
Janine R. Wedel          download pdf

The need for a new public administration          170
James K. Galbraith          download pdf

Industrial policy, then and now          178
Victoria Chick         download pdf

Putting the nation-state back in: public economics and the global economy          189
Michael Lind          download pdf

The entrepreneurial state: socializing both risks and rewards          201
Mariana Mazzucato          download pdf

Board of Editors, past contributors, submissions, etc.          218

The debate continues in the same absurd, polarized and simplified form.  

February 20, 2018 5 comments

from Neva Goodwin 

One of the outstanding features of the time in which we live is the terrifying prospect of global climate change, regarding which it has been said that contemporary humankind is suffering from “Pre-Traumatic Stress Disorder”. Whether we squarely face what this will likely mean for the coming years, or whether we simply can’t bear to look at the facts, it is getting ever harder to avoid the gut-knowledge that the world is rapidly becoming markedly less beautiful, rich and generous to its human inhabitants. Tens of thousands of species disappear forever every year. Large coastal land areas will be submerged; diseases will multiply and spread; food from the oceans and the climate-stressed fields will be scarce; fresh water will be expensive or unobtainable for ever more millions of people; environmental refugees will swell the ranks of unwelcome migrants; and armed conflicts will reach many people who had assumed they were safe.

Armed fortress living will be increasingly common among the rich, and will doubtless create some areas of relative security, but the people inside will be their own prisoners. They will find it difficult to visit the beautiful natural areas in the United States, or the cultural jewels of other continents. Many of these cultural jewels are already being sacked in the raging conflicts of the Middle East and elsewhere; many of the world’s natural beauties are already eroding under pressure from climate change – as well as from actors in the market economy. The rich are not immune to pre-traumatic stress, as this century heads for various forms of catastrophe; their awareness and response will be important for any hope we may have for a constructive response to the threats we face. An indicator of awareness is a comment by the investor, Seth Klarman, warning that the Trump administration could lead to a major stock market correction and “global angst” among the investor class. But some of that angst is already translating into escapist survivalism among those who can afford to buy land in New Zealand, or build bunkers out of former missile sites in the U.S.. The work of Dr Richard Rockefeller, to whom this piece is dedicated, is an example of a more responsible kind of reaction among the one percent.  Read more…

Denial of the public non-market system, and the consequences

December 2, 2017 8 comments

from June Sekera

The Denial

Public non-market production makes up a quarter to a half or more of all economic activity among advanced democratic nation-states. Yet the public economy’s ability to function on behalf of the populace as a whole is seriously imperiled in many western democracies, and particularly jeopardized in the United States. The surging influence of mainstream economics has been a prime factor in the degradation of the public domain over the last several decades – a phenomenon that James Galbraith (2008) has called “the collapse of the public governing capacity.” Market advocates, exploiting neoclassical economic theory, have foisted market axioms and precepts onto government, intent on transforming public goods production in imitation of an idealized and idolized market model. The ravaging of government in the interests of ideology and private profit has proceeded largely unhampered because we have no adequate theory to explain the nature and dynamics of the non-market public economy, no intellectual infrastructure to explain how its purposes and processes differ crucially from those of the market, and no effective explanatory model that shows why such differences matter substantially for democratic governance and the well-being of the populace.   Read more…

Trumponomics: causes and consequences – Part I – RWER issue no. 78

March 22, 2017 1 comment

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Preface          download pdf

Trumponomics: everything to fear including fear itself?          3
Jamie Morgan          download pdf                                                                           

Can Trump overcome secular stagnation?          20
James K. Galbraith            download pdf                             

Trump through a Polanyi lens: considering community well-being          28
Anne Mayhew            download pdf                                                                                    

Trump is Obama’s legacy. Will this break up the Democratic Party?          36
Michael Hudson          download pdf

Causes and consequences of President Donald Trump          44
Ann Pettifor               download pdf                                

Explaining the rise of Donald Trump          54
Marshall Auerback          download pdf 

Class and Trumponomics          62
David F. Ruccio          download pdf 

Trump’s Growthism: its roots in neoclassical economic theory          86
Herman Daly          download pdf 

Trumponomics: causes and prospects          98
L. Randall Wray          download pdf 

The fall of the US middle class and the hair-raising ascent of Donald Trump
Steven Pressman          download pdf          112

Mourning in America: Trump and the traumas of the twenty-first century          125
Neva Goodwin          download pdf 

How the Donald can save America from capital despotism          132
Stephen T. Ziliak          download pdf 

Prolegomenon to a defense of the City of Gold          141
David A. Westbrook          download pdf 

Trump’s bait and switch: job creation in the midst of welfare state sabotage
Pavlina R. Tcherneva           download pdf          148

Can ‘Trumponomics’ extend the recovery?          159
Stephanie Kelton           download pdf 

Board of Editors, past contributors, submissions and etc.          173

Ethics, goals, and well-being

November 1, 2014 5 comments

from Neva Goodwin

Twentieth century economics supported, implicitly when not explicitly, the idea that neither ethics nor history nor the institutions of law or culture were of much economic importance – as long as these things did not get in the way of “free” market functioning. This case was pressed with special vigor from about 1970 to the end of the 20th century by economists from what was known as the Chicago School.

Even early on in this period there began to be concern that individuals acting solely to achieve their personal goals could not be counted on to operate a business in ways that would be good for the business itself. This real-world concern, combined with the dogma that people only act on the basis of self-interest, resulted in various efforts to motivate business leaders by offering rewards for specific markers of success (such as the price of the company’s stock). These efforts had the unintended consequence of escalating compensation of top management in the United States to levels that were many times greater than anything that had previously been considered normal (or were normal in other countries). They also resulted in an increasingly short-term vision on the part of business leaders. Very large scale frauds, Ponzi schemes, tax evasions, and environmental and human costs that businesses externalized during this period have made it increasingly evident that society cannot afford to encourage a culture of economic activity that ignores all normal human motivations except the selfish pursuit of personal gain.  Read more…

The role of influence

October 18, 2014 Leave a comment

from Neva Goodwin

Herbert Simon received the Nobel Prize in 1978. This fact had little or no influence on subsequent economics textbooks, which sometimes mentioned bounded rationality, but did not reduce their dependence on the old rationality postulate as the foundation for deducing all human behaviour.

Simon was not the first critic to be so dismissed. Decades before behavioral economics came into fashion “alternative” economists were complaining about the unrealism of the neoclassical view of humanity. They especially focused on the fact that, as Smith had so well recognized, people are social animals. Relatively few of our actions are taken completely without regard for what we have seen other people do, or what we expect that other people will think. Even popular books on finance refer to the “herd instinct” in reference to the way investors follow fads and fashions of thought. There appears to be an inborn tendency for people to act as part of some kind of human collective, rather than in isolation. Yet this had no place in the neoclassical understanding of human behaviour.

Read more…

Bounded rationality

October 11, 2014 Leave a comment

from Neva Goodwin

Rationality has become a loaded word in economics, bringing with it the baggage of earlier models that did not anticipate the findings of behavioral economics or take into account other every-day observations. The traditional rationality model includes the assumption that rational behavior is optimizing behavior (“rational economic man maximizes his utility”). In the 1970s an extreme version of this made the further assumption that rational economic actors have “perfect information.” A slightly more modest version says that people will collect information until the perceived costs of acquiring additional information exceed the perceived benefits.

One of the most effective challenges to the traditional assumption of rationality came from Herbert Simon, another non-economist winner of the Nobel Memorial Prize in economics (1978). Considering whether it is indeed possible for people to identify the optimal point at which one should cease gathering additional information, Simon showed that one first needs to have complete knowledge of all possible choices in order to identify that optimal point. Determining what additional information might be out there, and then gathering it, can be very costly in time, effort, and money – if it is even possible. Accordingly, Simon maintained, people rarely optimize. Instead they do what he called “satisficing;” they choose an outcome that would be satisfactory, and then seek an option that at least reaches that standard.

Read more…

Behavioral economics

October 4, 2014 3 comments

from Neva Goodwin

Neoclassical economics claims to be based entirely on a view of human nature which is not only morally repugnant, but which also both leaves out a great deal about how people actually do operate, while it brings in seriously contrary-to-fact assumptions about what people are capable of. The latter have included assumptions about consistency (including that preferences change slowly, if at all, and that if A is preferred to B and B is preferred to C, then C cannot be preferred to A); about information (people are able to act as if they have perfect information); about self-knowledge (people know what they want, and are best served by getting what they want); and about influence, or power. The last of these assumptions includes the idea that human wants and preferences are endogenous, generated entirely from within; it ignores the extent to which people’s choices and decisions may be manipulated by those who have an interest in persuading the public to buy certain things, or vote in certain ways. It ignores the reality that market economies are rife with powerful actors who do have such an interest, in both the economic and the political spheres.  Read more…

The psychological “foundations” for neoclassical economics

September 27, 2014 14 comments

from Neva Goodwin

When I was beginning my studies in this field economist Robert Solow commented to me that the great strength of economics is that it is fully axiomatized; the entire edifice can be deduced from the basic rationality axiom, which says that rational economic man maximizes his utility. The origin of this axiom is often traced back to Smith, whose most widely quoted phrase comes from a passage in which Smith approvingly notes that merchants take what, today, we would call, a protectionist position – doing so, not with any thought for the good of society, but because their security and profit is tied to domestic industry. Thus, he says, the merchant “is in this as in many other cases, led by an invisible hand to promote an end which is no part of his intention.”[1] Excerpts such as this have been used as a justification for the 20th century economic model’s vision of an ideal world in which a society comprised of entirely self-interested economic actors would make the society as a whole better off, and the idea that pursuit of self-interest is the only thing that is done by rational economic actors – and that anything else is irrational. Read more…

Mainstream economics teaching in the late 20th Century

September 20, 2014 12 comments

from Neva Goodwin

There are some true and useful things to be learned in standard 20th century economics, such as the basic concepts of supply and demand intersecting to create wages and prices. However if you ever took an economics course you may have since discovered that many other things also affect prices, such as advertising, or consumers’ lack of information. And wages involve even more complicated human interactions, habits and expectations. These complexities and exceptions don’t get much hearing in introductory courses – and, surprisingly, they get even less at the upper levels, where, instead, progressively more mathematics are imposed on a progressively more abstract picture of an economy. Meanwhile the students are also being taught a lot that is dangerous. Here are some of the take-aways from the standard economics course: Read more…

How we got here: Adam Smith minus Karl Marx; Keynes tortured by Samuelson

September 13, 2014 6 comments

from Neva Goodwin

Adam Smith, generally regarded as the begetter of modern economic theory, stressed issues of growth and distribution, based on an image of smoothly functioning markets. The pieces of Smith’s legacy that remained significant for what I will refer to as 20th century economics (though I will focus especially on the second half of the past century) were the emphasis on growth, and admiration for markets. This truncated legacy greatly reduced the emphasis on distribution, while also missing Smith’s concern that markets might not always function optimally. He especially pointed to monopolistic behavior as a problem, and supported various kinds of government intervention to keep the market on track. Ignoring these caveats, 20th century economists pursued the optimistic program of modeling a world in which perfect markets lead to optimum social outcomes.

The classical economists – those holding the stage approximately until Marshall’s time – also included Karl Marx, whose concerns for inequality and class conflict were shared by Smith (though they expressed themselves very differently).  Read more…

The content of standard introductory economics courses

September 8, 2014 7 comments

Economics textbooks are not only written for students. At two critical points in the history of economic thought textbooks have played significant roles in defining the field, not only for what is taught, but more importantly (in terms of real world outcomes) for the understanding of the economy that is used by politicians, policy makers, and the public, when it votes its approval or disapproval of how the government is affecting the economy.

This started in the 1890s, when Alfred Marshall wrote the first edition of his text, called Principles of Economics. It went through 8 editions, the last being published in 1920. For a large part of the English-speaking world Marshall’s textbook continued to define the field (especially the microeconomics basics) until the middle of the 20th century, when it was replaced by Paul Samuelson’s Economics (first published in 1948). That set the standard for about the next 60 years.

Read more…

Comments on RWER issue no. 68

August 22, 2014 20 comments

You may post  and read comments on individual papers by clicking below on the paper titles.  To qualify for posting, comments must refer directly to the RWER paper, and not just to other comments.

Posted comments may be considered for publication in the journal.
Download the whole issue here


Monetary policy in the US and the EU after quantitative easing          2

Thomas Palley       download pdf


Processes vs. mechanisms and two kinds of rationality          10

Gustavo Marqués      download pdf


A systems and thermodynamics perspective on technology in the circular economy          25

Crelis F. Rammelt and Phillip Crisp      download pdf


Back where we started from: ‘the Classics’ to Keynes, and back again             41

Roy H Grieve     download pdf


Demand theory is founded on errors          62

Jonathan Barzilai     download pdf


The central bank with an expanded role in a purely electronic monetary system          66

Trond Andresen     download pdf


Financialization, income distribution and social justice:        74

Recent German and American experience

Robert R Locke     download pdf


Recovering Adam Smith’s ethical economics          90

Thomas R. Wells     download pdf


The human element in the New Economics          98

Neva Goodwin     download pdf


Placing economists’ analyses of antidumping in an antitrust context          119

John B. Benedetto      download pdf


Board of Editors, past contributors, submissions and etc.                147

Modeling financial instability

February 7, 2014 5 comments

from Steve Keen

This paper will be published in a forthcoming book on the crisis edited by Malliaris, Shaw and Shefrin. In what follows, I derive a corrected formula for the role of the change in debt in aggregate demand, which is that ex-post aggregate demand equals ex-ante income plus the circulation of new debt, where the latter term is the velocity of money times the ex-post creation of new debt.

The PDF is available here: Keen2014ModelingFinancialInstability. The Minsky models used in this paper are here in a ZIP file. The latest version of Minsky can be downloaded from here.

  • Introduction

Literally no-one disputes that the financial sector was the cause of the post-2007 economic crisis: disputation instead centers on the causal mechanisms. I follow Fisher (Fisher 1933) and Minsky (Minsky 1980) in assigning key roles to the growth and contraction of aggregate private debt (Keen 1995; Keen 2000), but this perspective is rejected by New Keynesian economists on the a priori basis that private debts are “pure redistributions” that “should have no significant macro-economic effects” (Bernanke 2000p. 24), and as a corollary to the oft-repeated truism that “one person’s debt is another person’s asset” (Krugman 2012c, p. 43).

My analysis also follows the Post Keynesian tradition of Read more…

Discussion of the week: “Efficiency”

November 10, 2010 6 comments

 McDonald, Nome, Zimmerman, Radford, Knibbe and Omahkohkia

The  catalyst for this discussion was the post Thought for tomorrow: Every orthodox economics education begins with a lie, which begins:
Every orthodox economics education begins with a lie. This is that, in the vernacular of neo-classical economics, we can and must split questions of ‘equity’ from those of ‘efficiency’. To put this another way, economics begins by ignoring moral philosophy, arguing that it is still possible to analyse, model and criticise social and economic relations without resorting to the language of values or justice. 

Contributors to RWER

October 22, 2009 2 comments

On November 8, 2009 this site was launched as a communal blog for contributors to the real-world economics review, who in order of their first appearance are as follows:

Edward Fullbrook, James Galbraith,  Fank Ackerman, André Orléan, Hugh Stretton, Jacques Sapir, Gilles Raveaud, Deirdre McCloskey, Tony Lawson, Geoff Harcourt, Joseph Halevi, Sheila C. Dow, Kurt Jacobsen, The Cambridge 27, Paul Ormerod, Steve Keen, Grazia Ietto-Gillies, Emmanuelle Benicourt, Le Movement Autisme-Economie, Geoffrey Hodgson, Ben Fine, Michael A. Bernstein, Julie A. Nelson, Jeff Gates, Anne Mayhew, Bruce Edmonds, Jason Potts, John Nightingale, Alan Shipman, Peter E. Earl, Marc Lavoie, Jean Gadrey, Peter Söderbaum, Bernard Guerrien, Susan Feiner, Warren J. Samuels, Katalin Martinás, George M. Frankfurter, Elton G. McGoun, Yanis Varoufakis, Alex Millmow, Bruce J. Caldwell, Poul Thøis Madsen, Helge Peukert, Dietmar Lindenberger, Reiner Kümmel, Jane King, Peter Dorman, K.M.P. Williams, Frank Rotering, Ha-Joon Chang, Claude Mouchot, Robert E. Lane, James G. Devine, Richard Wolff, Jamie Morgan, Robert Heilbroner, William Milberg, Stephen T. Ziliak, Steve Fleetwood, Tony Aspromourgos, Yves Gingras, Ingrid Robeyns, Robert Scott Gassler, Grischa Periono, Esther-Mirjam Sent, Ana Maria Bianchi, Steve Cohn, Peter Wynarczyk, Daniel Gay, Asatar Bair, Nathaniel Chamberland, James Bondio, Jared Ferrie, Goutam U. Jois, Charles K. Wilber, Robert Costanza, Saski Sivramkrishna, Jorge Buzaglo, Jim Stanford, Matthew McCartney, Herman E. Daly, Kyle Siler, Kepa M. Ormazabal, Antonio Garrido, Robert Locke, J. E. King, Paul Davidson, Juan Pablo Pardo-Guerra, Kevin Quinn, Trond Andresen, Shaun Hargreaves Heap, Lewis L. Smith, Gautam Mukerjee, Ian Fletcher, Rajni Bakshi, M. Ben-Yami, Deborah Campbell, Irene van Staveren, Neva Goodwin, Thomas Weisskopf, Mehrdad Vahabi, Erik S. Reinert, Jeroen Van Bouwel, Bruce R. McFarling, Pia Malaney, Andrew Spielman, Jeffery Sachs, Julian Edney, Frederic S. Lee, Paul Downward, Andrew Mearman, Dean Baker, Tom Green, David Ellerman, Wolfgang Drechsler, Clay Shirky, Bjørn-Ivar Davidsen, Robert F. Garnett, Jr., François Eymard-Duvernay, Olivier Favereau, Robert Salais, Laurent Thévenot, Mohamed Aslam Haneef, Kurt Rothschild, Jomo K. S., Gustavo Marqués, David F. Ruccio, John Barry, William Kaye-Blake; Michael Ash, Donald Gillies, Kevin P.Gallagher, Lyuba Zarsky, Michel Bauwens, Bruce Cumings, Concetta Balestra, Frank Fagan, Christian Arnsperger, Stanley Alcorn, Ben Solarz, Sanford Jacoby, Kari Polanyi, P. Sainath, Margaret Legum, Juan Carlos Moreno-Brid, Igor Pauno, Ron Morrison, John Schmitt, Ben Zipperer, John B. Davis, Alan Freeman, Andrew Kliman, Philip Ball, Alan Goodacre, Robert McMaster, David A. Bainbridge, Richard Parker, Tim Costello, Brendan Smith, Jeremy Brecher, Peter T. Manicas, Arjo Klamer, Donald MacKenzie, Max Wright, Joseph E. Stiglitz. George Irvin, Frédéric Lordon, James Angresano, Robert Pollin, Heidi Garrett-Peltier, Dani Rodrik, Marcellus Andrews, Riccardo Baldissone, Ted Trainer, Kenneth J. Arrow, Brian Snowdon, Helen Johns, Fanny Coulomb, J. Paul Dunne, Jayati Ghosh, L. A Duhs, Paul Shaffer, Donald W Braben, Roland Fox, Stevan Harnad, Marco Gillies, Joshua C. Hall, Robert A. Lawson, Will Luther, JP Bouchaud, Claude Hillinger, George Soros, David George, Alan Wolfe, Thomas I. Palley, Sean Mallin, Clive Dilnot, Dan Turton, Korkut Ertürk, Gökcer Özgür, Geoff Tily, Jonathan M. Harris, Thomas I. Palley, Jan Kregel, Peter Gowan, David Colander, Hans Foellmer, Armin Haas, Alan Kirman, Katarina Juselius, Brigitte Sloth, Thomas Lux, Luigi Sapaventa, Gunnar Tómasson, Anatole Kaletsky, Robert R Locke, Bill Lucarelli , L. Randall Wray , Mark Weisbrot  Walden Bello, Marvin Brown, Deniz Kellecioglu, Esteban Pérez Caldentey, Matías Vernengo, Thodoris Koutsobinas, David A. Westbrook, Peter Radford 

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