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Trump’s Trade War

May 3, 2018 1 comment

from C. P. Chandrasekhar

After a year of huffing and puffing, President Donald Trump has launched, since January this year, what some are terming a trade war—fought in scattered industrial and selected locations. It started with quotas and tariffs on solar panel and washing machine imports, but then moved menacingly to steel and aluminium. Tariffs on these two products have been imposed under a WTO clause relating to imports that threaten national security, even while Trump’s rhetoric refers to competition from “cheap metal that is subsidized by foreign countries”, which amounts to a completely different ‘dumping’ charge.

With the tariff hike on steel at 25 per cent and that on aluminium 10 per cent the imposts are not trivial, though there are exemptions promised, subject to conditions, for Canada, Mexico, South Korea and some others. All this put together did not mean too much though. Reuters quotes Morgan Stanley as placing steel, aluminium, washing machines and solar panels together at a little more than 4 per cent of US imports. But then on 22 March, Trump announced trade sanctions on China, on the grounds that China was using unfair tactics such as hacking commercial secrets and demanding disclosure of “trade secrets” by US companies in return for access to the Chinese market. Those measures included investment restrictions and tariffs on Chinese exports valued at $60 billion.  Read more…

European Appeal – companies and employees – blazing a new European trail

May 2, 2018 4 comments

from Olivier Favereau 

Something has gone wrong in the European Union. Four examples bear witness to this dysfunction. How can it be justified that hundreds of thousands of letter-box companies have been allowed to develop, when the aim of these ghost companies is to evade taxes, labour laws and regulations? How can it be explained that European Court of Justice decisions authorized the restriction of employees’ fundamental rights in order to support business schemes whose very objective was to circumvent the protection of employees? How could recurring revelations such as those made by the Panama Papers and the Paradise Papers fail to have consequences, showing the EU’s inability to prevent tax circumvention by wealthy individuals and large companies? Finally, how could we accept that, despite scandals such as the Rana Plaza factory collapse in Bangladesh, many companies have continued to turn a blind eye to suppliers that ignore the most basic social, environmental and human rights?

The “shareholder primacy” theory has been promoted by the European Commission while the real economy and employees have been forgotten in the process. As a result, profits have grown at the expense of wages since the 1990s. This does not make sense. Employees are a core constituency of companies: while shareholders contribute capital, employees contribute their time, skills and life. That is why it is time to revisit the situation of the more than 140 million EU employees working in companies. The elections for the European Parliament are in one year’s time, and we wish to set the upcoming debate on the right footing.

We deeply believe that it is vital that the following five reforms be undertaken.  Read more…

The Big Five: Australia, USA, Canada, Luxembourg and Saudi Arabia

April 29, 2018 10 comments

CO2 Emissions-PerCapita

source: http://www.oecd.org/sti/ind/carbondioxideemissionsembodiedininternationaltrade.htm

Oxfam report on the rich-poor divide

April 28, 2018 3 comments

Trends of bottom 50% income share: USA and China versus France

April 26, 2018 1 comment

new issue of Economic Thought

April 26, 2018 Leave a comment

Top marginal U.S. income tax rate 1913 to 2013

April 25, 2018 5 comments

marginal tax rates

source: https://www.huffingtonpost.co.uk/entry/economists-tax-rich_n_6024430

Global income distribution 1800, 1975 and 2010

April 22, 2018 3 comments

Family wealth redistribution in US from 1989 to 2013

April 21, 2018 2 comments

Source: https://ftalphaville.ft.com/2018/01/04/2197227/eight-charts-on-inequality-in-the-us/

Changing global income distribution

April 20, 2018 2 comments

Inter-generational wealth redistribution in the USA 1989 to 2016

April 19, 2018 Leave a comment

Top 10% national income share across the world 1980 to 2016

April 18, 2018 Leave a comment

A typology of uncertainties

April 16, 2018 18 comments

from J.-C. Spender

There is some heavy stuff in this section – but we cannot get beyond today’s literature on managing as rational decision-making and connect with managers’ practice without engaging uncertainty. All attempts to define uncertainty must fail – by definition, for to define is to take as certain, axiomatic. Those who see uncertainty in terms of probability stand on the certainty of population statistics. Knight saw such modified certainty as ‘risk’. Yes, risk management is important, just as is distinguishing knowing definitively from knowing statistically. But the difference here is methodological and neither mode grasps Knightian uncertainty. Probability is logical/nomothetic, computable. In contrast Knight’s notion was implicitly idiographic, the sense of an absence of certainty arising from an ideographic experience of not-knowing. Something failed, what was expected did not occur – why not? Was the causal sequence (nomothetic) adopted wrong, or did the fault lie with the situation’s ideographic characterization – its initial conditions etc.? Such questions must still be expressed in language, thus standing on what is known. Like us all, Knight struggled with Aristotle’s nomothetic/idiographic distinction, the failure to relate knowing and experiencing, the inevitable separation between the totality and immediacy of living versus explaining it with abstract concepts.  Read more…

Dysfunctionalism in US economic departments and business schools

April 15, 2018 5 comments

from John Locke

The problem, however, is not the failure of economic departments and business schools to create a prescriptive science, but the refusal of nomothetic neoclassical economists and mathematical modelers in them to admit the failure, and their actions after they gained a monopoly of the sinews of institutional power, that produced dysfunctionality in Anglo American higher education. That dysfunctionalism is expressed in their constant battle with people in academia who realize the prescriptive failure of the nomothetic science project, with which readers of the Real-World Economics Review blog are painfully familiar, and a dysfunctionalism that results in education from their narrow minded refusal (b) to accept the importance of the ideographic tradition in economic and business studies during the current crisis in U.S. management capitalism.  Read more…

The relationship of the real investment led economy perspective to existing views

April 14, 2018 1 comment

from Michael Joffe

This perspective contrasts with standard neoclassical theory in several respects. That theory puts forward models relating to the decision making of (potential) workers, and of firms – respectively the supply of and the demand for labor. Workers choose whether or not to accept employment, based on a comparison of the offered wage with their reservation wage. Firms’ decision making is seen as a comparison between employing one more or one fewer worker with the difference this would make to production – respectively marginal cost and marginal benefit – given that the firm already exists, and has an established production system with premises, equipment, etc. Neoclassical theory implies that the forces of demand and supply rapidly bring about an equilibrium in which there is neither excess demand for labor, nor excess supply.  Read more…

Game theory, Larry Samuelson and one of the most widespread myths in economics

April 14, 2018 1 comment

from Bernard Guerrien

 One of the most widespread myths in economics, but also in sociology and political science, is that game theory provides “tools” that can help solve concrete problems in these branches – especially in economics. Introductory and advanced textbooks thus often speak of the “applications” of game theory that are being made, giving the impression that they are revolutionizing the social sciences. But, looking more closely, we see that the few examples given concern mostly the usual “stories” (prisoners’ dilemma, “chiken”, battle of sexes, entry deterrence, store chain paradox, centipede game, etc.) of “old” game theory. Take the four volume set Handbook of Game Theory with Economic Applications – a Handbook that provides an extensive account of what has been done in the field of game theory from its beginning, especially in economics, but not exclusively. Despite its title, there is not the slightest trace of a concrete example of an application, nor do we find any numerical data in its thousands of pages. This is not surprising. Mathematical reasoning requires clear and explicit enunciation of the assumptions used in its demonstrations. In particular, the assumptions concerning the information available to each player – his payoffs and those of the other players for each outcome of the game, the rules of the game, etc. – are so restrictive that there is no concrete situation in the world where they could possibly be verified, not even roughly (Guerrien, 2004, p. 2-3). As Ariel Rubinstein, another renowned game theorist puts it:  Read more…

Modern Money Theory (MMT) vs. Structural Keynesianism

April 10, 2018 17 comments

from Thomas Palley

A journalist sent me some questions about MMT. My answers are below.

1. What are the major flaws you see within Modern Monetary Theory?

(A) I like to say that MMT is a mix of “old” and “new” ideas. The old ideas are well known among Keynesian economists and are correct, but the new ideas are either misleading or wrong.

The essential old idea, which everybody knows, is government has the power to issue money. We used to talk of “printing” money. In today’s electronic world we talk about “keystroke” money created by electronic credit entries.

Everyone knows that because government has the capacity to create money, it can always pay its bills and debts by printing money. But having the capacity is not the same thing as saying it should, which is the beginning of where MMT goes astray.

In economic debate and economic journalism there is a “demand for difference”. On one side you have extreme budget hawks who see every deficit as a dire existential threat. MMT is the counterpart to the hawks. And here’s the rub. MMT is needed as an anti-dote to austerity hawks, but neither make for good economic theory.

That creates a dilemma for progressive economists. On one hand, there is need for a powerful progressive polemic to counter neoliberal austerity polemic. The basic MMT message that government has a lot more fiscal space than mainstream economists say, is correct. On the other hand, MMT’s theoretical arguments are not novel, and are sometimes incorrect.  Read more…

How unequal are world incomes?

April 4, 2018 1 comment

from C.P. Chandrasekhar and Jayati Ghosh

In discussions of global inequality, there is general agreement that, whatever else may have happened, within-country inequality has increased in most cases, even as between-country inequality has come down. But overall, because of the recent emergence of countries with large populations like China and India, there has actually been some reduction in global inequality, because of increasing incomes in the  “middle” of the global distribution. Chart 1 shows that, whether measured by the Gini coefficient (a measure of the dispersion of incomes of the population) or the Palma  ratio (the ratio of the share of income of the top ten per cent of the population to the bottom 40 per cent), inequality has declined especially since the turn of the century.

Chart 1: Global income inequality appears to have come down

Source: World Inequality Report 2018.  Read more…

The Piketty effect

April 2, 2018 3 comments

from Eli Cook  

A few years ago, I opened my review of Thomas Piketty’s Capital in the 21st Century in the Raritan Quarterly Review with this “bait and switch” vignette. I thought the striking similarities between George and Piketty revealed that while history does not repeat itself, the “Pikettymania” that washed over the world in 2014 might bring forth once more an era in which – much like during the “Gilded Age” of Henry George – economic inequality was at the forefront not only of economic thought but political agitation, social anxiety and cultural discourse.[1]

Looking back now to those heady days in 2014, it is clear that Piketty’s groundbreaking study was just the beginning. The floodgates of inequality studies have been opened. The wave ushered in by Piketty has, in the past few years, come in many shapes and sizes: We now have global analyses such as Branko Milanovich’s Global Inequality, centuries-long histories such as Unequal Gains, and a collected volume dedicated entirely to the economic agenda titled After Piketty. The dramatic titles of other recent books reveal the current mood of inquiry, be it Thomas Shapiro’s Toxic Inequality: How America’s Wealth Gap Destorys Mobility, Deepens the Racial Divide, & Threatens Our Future, Dean Baker’s Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer Steven Teles and Lindsay Brink’s The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality or Brian Alexander’s Glass House: The 1% Economy and the Shattering of the All-American Town. It appears, that the “1 percent” have not only been gobbling up much of the wealth and income these past few decades but, in recent years, also the attention of economists, journalists and public intellectuals.[2]   Read more…

issue no. 83 of the real-world economics review

March 26, 2018 Leave a comment

download whole issue

Ten years after the crisis: a lost decade?          2
Steven Pressman and Robert Scott           download pdf        

The great marginalization: why twentieth century economists neglected inequality          20
Eli Cook           download pdf

Game Theory
On the current state of game theory          35
          Bernard Guerrien           download pdf

Why game theory never will be anything but a footnote in the history of social science          45
          Lars Pålsson Syll           download pdf

Employment
The creation of jobs         65
          Michael Joffe          download pdf

Employment in a just economy          87
          John Komlos          download pdf

Business Studies
Managing the engines of value-creation          99
          J.-C. Spender          download pdf

The effect of academic business studies in Germany and America in the modern era          116
          Robert R. Locke          download pdf

Does the maximization principle break down during recessions?          138
Philip George          download pdf

The political economy of reforms in Europe          147
Yiannis Kokkinakis          download pdf

Book review essay
The Vienna school of ecological economics          163
Katharine N. Farrell          download pdf

Board of Editors, past contributors, submissions, etc.          170