new issue of real-world economic review

real-world economic review

issue no. 101   –   September 2022

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Two conceptions of the nature of money 
Tony Lawson          2

How power shapes our thoughts
Asad Zaman         20

SARS-CoV-2: The Neoliberal Virus
Imad A. Moosa          27

The giant blunder at the heart of General Equilibrium Theory
Philip George          38

A life in development economics and political economy: An interview with Jayati Ghosh
Jayati Ghosh and Jamie Morgan          44

John Komlos and the Seven Dwarfs
Junaid B. Jahangir          65

A three-dimensional production possibility frontier with stress
John Komlos           76

Free trade theory and reality:
How economists have ignored their own evidence for 100 years
Jeff Ferry          83

The choice of currency and policies for an independent Scotland:
A debate through the lenses of different economic paradigms
Alberto Paloni          90

End Matter 107

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RWER issue no. 98

real-world economics review

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issue no. 98
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101 Textbooks The riddle of the use of impossible examples in microeconomics textbooks Emmanuelle Bénicourt, Sophie Jallais and Camille Noûs	2
101 Textbooks The 1-2-3 toolbox of mainstream economics: promising everything, delivering nothing Shimshon Bichler and Jonathan Nitzan	23
Capitalists are dispensable, laborers are not M. Shahid Alam	49
Redistributing income through hierarchy Blair Fix	58
The Becker model of discrimination is anachronistic and should no longer be taught John Komlos	87
“Susan Strange saw the financial crisis coming, Your Majesty” Nat Dyer	92
Measuring economic transformation: what to make of constant price sectoral GDP Adam Fforde	112
Booming wealth alongside fiscal concerns about ageing populations David R Richardson	135
Price indices suitable for the monetary policy Carlos Guerrero de Lizardi	149
Interview From the political economy of financial regulation and economic governance to climate change Jamie Morgan with Andrew P. Baker	169
Board of Editors, past contributors, submissions, etc	203

 

Issue 91 of real-world economics review

real-world economics review

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issue no. 91
16 March 2020
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Complexity, the evolution of macroeconomic thought, and micro foundations David Colander	2
Models and reality: How did models divorced from reality become epistemologically acceptable? Asad Zaman	20
ECONOMICS 101 (editors invite more papers on Economics 101) The value of “thinking like an economist” Bernard C. Beaudreau	45
An essay on the putative knowledge of textbook economics Lukas Bäuerle	53
World population: the elephant in the living room Theodore P. Lianos	70
The carbon economy – rebuilding the building blocks of economics and science John E. Coulter	83
Breaking the golden handcuffs: recreating markets for tenured faculty M. Shahid Alam	91
Reinforcing the Euro with national units of account Gerald Holtham	102
Neoliberalism vs. China as model for the developing world Ali Kadri	108
Classifying “globally integrated” production firms from a worker/citizen perspective John B. Benedetto	128
REVIEW ESSAY Tony Lawson, economics and the theory of social positioning Jamie Morgan	132
INTERVIEW Ecological and feminist economics: an interview with Julie A. Nelson Julie A. Nelson and Jamie Morgan	146
Board of Editors, past contributors, submissions, etc.	154

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RWER special issue: Economics and the Ecosystem

Real-World Economics Review – issue no. 87

Economics and the Ecosystem

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Introduction           2
Jamie Morgan and Edward Fullbrook           download

Growthism: Its ecological, economic, and ethical limits          9
Herman Daly           download

Producing ecological economy          23
Katharine N. Farrell          download

Economics 101: dog barking, overgrazing and ecological collapse          33
Edward Fullbrook          download

Addressing meta-externalities: investments in restoring the earth          36
Neva Goodwin          download

Degrowth: A theory of radical abundance          54
Jason Hickel          download

Environmental financialization: What could go wrong?          69
Eric Kemp-Benedict and Sivan Kartha          download

Elements of a political economy of the postgrowth era          90
Max Koch          download

Victim of success: civilisation is at risk          106
Peter McManners          download

Economism and the Econocene: A Coevolutionary Interpretation           114
Richard B. Norgaard          download

End game: The economy as eco-catastrophe and what needs to change         132
William E. Rees          download

An ecosocialist path to limiting global temperature rise to 1.5°C0          149
Richard Smith          download

Toward sustainable development: Democracy-oriented economics          181
Peter Söderbaum         download

Like blending chalk and cheese          196
Joachim H. Spangenberg and Lia Polotzek          download

Of Ecosystems and Economies: Re-connecting economics with reality          213
Clive L. Spash and Tone Smith          download

How to achieve the sustainable development goals by 2050          231
Per Espen Stoknes            download

The simpler way: envisioning a sustainable society in an age of limits          247
Ted Trainer and Samuel Alexander          download

Board of Editors, past contributors, submissions, etc.          261

With no paywalls, RWER’s papers now reach tens of thousands of economists around the world. And with no allegiances to financial interests, ideologies and hierarchies, the integrity and range of the journal’s content is not subject to the usual restraints. Instead the RWER depends on voluntary World Economics Association membership fees. This model works because there are enough readers able and willing to pay the voluntary fee. If you are not already, please consider becoming one of them.
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WEA Commentaries – new issue

Volume 7, Issue No. 6  Download the issue as a PDF

In this issue
A Philosophical Framework for Rethinking Theoretical Economics and Philosophy of Economics
Gustavo Marqués

Interview on The Fascist Nature of Neoliberalism
Flavia Di Mario

Doomed to Repeat
Peter Radford

The Invisible Hand in Context

Global Rentier Capitalism
David F Ruccio

Perfect Competition and Counterfactuals
Stuart Birks

Keynes was right about Quantitative Easing
Merijn Knibbe

How UBER Money Dominates and Distorts Economic Research on Ride-Hailing Platforms
Norbert Häring

Announcements and WEA contact details

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Neoclassical induced financial fragility. Central bank pension fund regulation edition.

Financial wizardry recently caused massive problems for UK pension funds and the Bank of England. The Bank of England forces pension funds to take part in ‘LDI’ contracts which aim to insure possible future liquidity problems. These contracts however lead to real liquidity problems, which forced the Bank of England to intervene to prevent a market melt down. The solution became the problem.

Deputy Governor John Cunliff of the Bank of England stated:

“The Bank was informed by a number of LDI fund managers that, at the prevailing yields, multiple LDI funds were likely to fall into negative net asset value. As a result, it was likely that these funds would have to begin the process of winding up the following morning… In that eventuality, a large quantity of gilts, held as collateral by banks that had lent to these LDI funds, was likely to be sold on the market, driving a potentially self-reinforcing spiral and threatening severe disruption of core funding markets and consequent widespread financial instability.”

Notice the ultra short periods whichm presumably, are specified in the LDI contracts: ‘Cash, Now!’. I haven’t read any of these contracts, if somebody can provide me with one: please! I do not see any reason for such ultra short periods.

This did not just happen in the UK. Related problems in the Netherlands in 2020 forced the ECB to intervene, to prevent a market melt down. This led Anil Kashyap, in a November 2020 speech at the Bank of England about the March 2020 crisis, to issue the next warning (emphasis added):

What is money?

from Tony Lawson and real-world economics review issue no. 101

What is money?  Two sorts of answer to this question can be found in the modern literature.  One locates money’s nature in the organising structure of human communities, the other in intrinsic properties of particular (money) items (like commodities, debts, precious metals and so on). If accounts of money that draw on social positioning theory are instances of the former, a currently very popular and seemingly increasingly influential version of the latter takes the form of modern money theory (MMT). Notably, however, whilst contributors to social positioning theory have regularly concerned themselves with elaborating explicitly a conception of money’s nature, proponents of MMT rarely address the matter explicitly; mostly the notions entertained must be inferred from monetary assessments and policy proposals and the like.

An exception to the latter, though, is provided by the writings of Randall Wray, a central contributor to MMT; and Wray (2022) has produced a new book on money in which the topic is again addressed head on. As Wray observes it is difficult to have confidence that claims about monetary policy are coherent if we do not first understand the nature of what is being talked about. I agree with Wray on this, albeit defending a different conception drawing on social positioning theory.

Here I take the publication of Wray’s new book as affording an opportunity to contrast (I intend constructively) the two accounts of money in question.

Neoliberalism as an enabler of the spread of coronavirus

from Imad A. Moosa and real-world economics review issue no. 101

The spread of the Coronavirus was aided by unpreparedness, the fact that the private sector cannot deal with a pandemic, neoliberal policy makers who could not care less about ordinary people, and years of dismantling public health systems through privatisation. Since the 1980s, belief in the power of the market has led to a status quo where governments take a back seat, allowing the private sector to steer the economy for the benefit of the oligarchy. As a result, governments have been put in a position where they are not always properly prepared and equipped to deal with crises such as Covid-19. Free markets cannot deal with a crisis of this magnitude. The economy is like the human body: a person who cuts himself shaving does not need the intervention of a surgeon, but the intervention of a surgeon is required when a person is involved in a major car accident.

Covid-19 is not a “black swan”, but rather a case of neglected risk, where neglect can be attributed to neoliberal thinking, to the belief that that the market can solve any problem and that it does a better job than the public sector.

We need our Hutton

from Peter Radford

– the question is how does economics get its much needed revamp?

This caught my eye:

“Debreu noted in his Nobel Prize lecture that the success of the mathematization of economic theory depended “on the fact that the commodity space has the structure of a real vector space”. We have shown that this is incorrect. The “price vector” is not a vector, and GET [General Equilibrium Theory] is therefore false. But we may go further and assert that not only was the proof incorrect, what was set out to be proved was not true in the first place. The real economy cannot be brought into equilibrium by adjusting prices. And indeed, the real economy is never in equilibrium.”

That’s the concluding paragraph in Philip George’s paper in the recently published Real World Economics Review #101.

The emperor, apparently, has no clothes.

But, then, we all knew that, didn’t we?

I wrote earlier this week about the difficulty we have in determining the efficacy of a supposed body of knowledge.  The arbiters of knowledge have a vested interest in maintaining the outward appearance of whatever it is they study.  They act like a priesthood intoning in ancient languages and using secret signs to distinguish themselves from the ordinary folk whom they intend to control or influence.  The problem is that we, those of us on the outside, can only rely on those arbiters for assurance that the efficacy they proclaim for themselves is actually, well, efficacious.  Worse, within a wide discipline such as economics, or applied mathematics as it has now become, the various sub-specialities are so specialized and the knowledge so arcane that anyone not within close proximity to it is unable to offer an opinion as to its validity.

This has become a fundamental and defining issue within economics.  The discipline needs good jolt of reality.  It needs a new direction.  It needs to shake off the errors of its past and begin anew.

Weekend read – Economics 999

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.

WEA Commentaries

Volume 9, Issue No. 1 Download the issue as a PDF       

• Karl Polanyi and social justice     Maria Alejandra Madi
• What can economics learn from medicine     Peter Swan
• How monetary union is sacrificed on the alter of competitiveness    Norbert Häring
• The Demise of Neoliberalism in Mexico today: if so, so what?      Juan Carlos Moreno-Brid              

Please support the WEA by paying a membership fee   or making a small donation

 

Globalization and The Great Reversal

from Jacques Sapir

Globalization is not, and never was, “happy” whatever various ideologues said. The idea that “sweet commerce”, was to be substituted for warlike conflicts, was much propagated. But, in truth, it was only a myth. Still, the warship preceded the merchant ship. The dominant powers have constantly used their strength to open up by force markets and modify the terms of trade as they see fit. The globalization that we have witnessed for nearly 40 years has been in combination with financial globalization, which has taken place with the unraveling of the system inherited from the Bretton Woods agreements in 1973. We are seeing today the result: a generalized march to regression, both economic and social, which strikes first the so-called “rich” countries but also those designated as “emerging” countries. It has led to the overexploitation of natural resources, plunging more than one and a half billion human beings into ecological crises that are getting worse every day. It has caused the destruction of social ties in a large number of countries, and there are also countless masses in the specter of the war of all against all, to the shock of an exaggerated individualism that suggests other regressions.[1]

At the root of this reversal we see the decline in incomes of the lower middle classes and the working class. And this drop is largely due to globalization.[2] The gap between the highest 1% and the lowest 90% has greatly increased since the 1980s as shown in Thomas Piketty’s work.[3] This discontinuation was confirmed by another study dating from 2015.[4] This discrepancy is also reflected in the drop-off between the rate of increase in labor productivity and the rate of hourly wages. While the two curves appear almost parallel between 1946 and 1973, which implies that productivity gains have also benefited wage earners and capitalists alike, it is no longer the case after 1973. 

“plunged willy nilly into the study of economics”

from Edward Fullbrook

Below are some comments by Steve Marglin, Peter Radford and myself that appeared in 2010 in the RWER in response to an essay by Peter Radford and that seem relevant to the discussion that Asad Zaman has recently launched in this blog: Is there a core of heterodox economics that we can all believe in? and Fundamental Flaws of Conventional Economics

Comments and reply on Peter Radford’s “Whither economics? What do we tell the students?”

Steve Marglin   [Harvard University, USA]

Dear Mr Radford,

I agree with most of what you say about economics, except that it is not as easy as you suggest to separate the study of economics from the study of economies. Keynes said it very well in the preface to the General Theory: the hardest part of coming to his new ideas was getting rid of the old ones.  The problem is that one needs some kind of framework for studying economies and is thus plunged willy nilly into the study of economics.

Coase and Reality

from Peter Radford

In his introduction to a collection of his own work, Ronald Coase tells us:

‘Becker points out that: “what most distinguishes economics as a discipline from other disciplines in the social sciences is not its subject matter but its approach”’.

He then goes on:

‘One result of this divorce of the theory from its subject matter has been that the entities whose decisions economists are engaged in analyzing lack any substance. The consumer is not a human being but a consistent set of preferences. The firm, to an economist, as Slater has said, “is effectively defined as a cost curve and a demand curve, and the theory is simply the logic of optimal pricing and input combination”. Exchange takes place without any specification of its institutional setting. We have consumers without humanity, firms without organization, and even exchange without markets.’

All true, too true. 

Part IV: Eleven ways to think like a post-crash economist

from Edward Fullbrook

Part I – Mankiw’s Neo-Platonism is anti-science
Part II – Mankiw’s use of emotionality and bullying
Part III –  Newton, Mankiw and Einstein

Eleven ways to think like a post-crash economist

For the last fifty years economics as a profession has shown exceptional talent for self-promotion.  Spurred on by self-delusion, it has persuaded the media to call its Bank of Sweden Prize a “Nobel Prize” and in the main has escaped ridicule even when, like Samuelson and Mankiw, it has represented its pursuits and achievements as resembling those of Newton and Einstein.  This self-exaltation has in the main enabled its anti-scientific methodology to escape outside notice, with the result that the broader intellectual community has accepted economics’ self-assessment.  But this was not always the case.

No, Obama, we don’t need free trade agreements with Panama, Colombia, and Korea

from Ian Fletcher

Obama is still pushing for free trade agreements with Panama, Colombia, and Korea, albeit with the thin fig leaf of demanding they be accompanied by money for so-called Trade Adjustment Assistance, a “painkiller” program designed to blunt the harm to laid-off workers.

The Republicans don’t like TAA, which has held up passage of these agreements momentarily, but both sides are still gunning to pass these agreements some time soon.

You think America has learned its lesson from NAFTA, which the Labor Department has estimated cost us 525,000 jobs? Think again.