Author Archive

Shaky Assumptions

All models by necessity distort reality in one way or another.  A sculptor, when modelling in stone or clay, does not try to clone Nature; he highlights some things, ignores others, idealizes or abstracts some more, to achieve an effect. Likewise a scientist must necessarily pick and choose among various aspects of reality to incorporate into a model.  An economist makes assumptions about how markets work, how businesses operate, how people make financial decisions.  Any one of these assumptions, considered alone, is absurd.  There is a rich vein of jokes about economists and their assumptions.  Take the old one about the engineer, the physicist, and the economist. They find themselves shipwrecked on a desert island with nothing to eat but a can of beans.  How to get at them?  The engineer proposes breaking the can open with a rock.  The physicist suggests heating the can in the sun, until it bursts.  The economist’s approach: “First, assume we have a can opener. . . .”

The assumptions of orthodox financial theory are at least as absurd, if viewed in isolation.  Consider a few:

1) Assumption: People are rational and aim only to get rich.  . . . . 

2) Assumption: All investors are alike.  . . . . 

3) Assumption: Price change is practically continuous.  . . . . 

4) Assumption: Price changes follow a Brownian motion.

Benoit B. Mandelbrot 

Simone de Beauvoir versus rational choice theory

from Edward Fullbrook

I publish also in philosophy, and yesterday evening it occurred to me that a passage I wrote as part of a philosophy book a few years ago might be of interest to economists open to reconsidering their metaphysics.  So here it is.

[Beauvoir’s] view of desire and value begs to be compared, (and Beauvoir herself makes this comparison), to the one which underpins the stylized notion of rationality, tendentiously called ‘rational choice theory.’  Although indigenous to economics, in recent decades this doctrine has colonized large parts of the social sciences and–as it is usually deployed–is a major sub-species of methodological individualism.  On two separate accounts, Beauvoir’s conception of desire and value reverses this currently influential mini-system of metaphysics.  The latter conceives of the individual as possessed of an ordered set of desires or values, called ‘preferences’, and it labels an individual ‘rational’ or ‘irrational’ if her or his choices confirm or disconfirm this presumed ordering.  Under this metaphysic, ‘rational consumer choice’, for example, is a euphemism for a kind of obedience to one’s supposed essence, so that a person who takes this ‘rational’ approach to their self is an example of someone caught up in the bad faith of immanence.  Beauvoir’s view of humankind does not admit a distinction between preferences and choices.  One can be ‘irrational’ in the sense of not choosing what people in authority would like other people to choose, or in the sense of miscalculating or misremembering the most efficient way to a goal, or in the sense of exercising one’s freedom to make different choices at different points in time, but not in the sense of not choosing what one prefers.  For Beauvoir, the last is both an ontological impossibility and a contradiction in terms.

Read more…

£4.6 million of funding for non-mainstream research: Town Meeting: London, 28 June 2016: proposals invited

Registration for the event closes tomorrow at 23.59

“Proposals will be invited to lead, develop and administer a single Network Plus, with funding available of up to £4.6 million (100 per cent fEC) over 48 months, . . . “ 

Attendance at the event is not a requirement for submitting a proposal, but is strongly advised.

Primary link: Understanding the Macroeconomy Network Plus   Read more…

Follow-up to The Rana Foroohar Phenomenon

This comment from our Robert Locke was posted a few minutes ago.

Edward and colleagues, if you want to know why Rana Foroohar subscribed to the rwer and took a lot of interest in our group, read the following email exchange between me and her:

“On May 17, 2016, at 5:19 PM, Robert Locke wrote:

Touching bases. Some time ago we corresponded about the state of economics. Do you remember? I think I advised you then to make sure that you look at the dissident economists, like those writing for the Real World Economic Review, and not just at orthodox economists, and I am pleased to see from your book, that you responded to this old professor’s advice. Hurrah!

Robert Locke

Foroohar, Rana – Time U.S.
6:59 AM (3 hours ago)

to me

I certainly did! And in fact you are mentioned in the love notes (aka acknowledgements) and footnotes. You were a key part of the birth of this book, which had already reached number 17 on the amazon kist after day one. Thank you for sharing your knowledge and I hope we get to meet in person at some point! Best R

The Rana Foroohar Phenomenon

from Edward Fullbrook

A few years ago I took out a subscription to Time magazine, not because I wanted to read its weekly version of the news, but because it provided me with ongoing access to the magazine’s digital archives which I needed for a long-term writing project.  So every Saturday the magazine with its iconic covers found its way into my home.  Initially most issues ended up in the recycling box with their transparent plastic envelopes unremoved.  But sometimes while waiting for the kettle to boil, l would unwrap and leaf through an issue, and then – it took me a few months – I became aware that there was an unexpected and admirable dimension to today’s Time.  It has a name: Rana Foroohar.  She was and is Time’s economics editor, and thanks to her reportage my copies of Time are no longer recycled still wrapped.  Time magazine cover - capitalism

Time Magazine is of course both traditional and conventional, but when it comes to economics Foroohar is neither.  In terms of Econ 101’s articles of faith, both Foroohar’s selection of significant facts and her analysis of them are frequently profane.  Reading Foroohar, I was repeatedly surprised to find myself reminded of books and papers by Michael Hudson, Steve Keen, James Galbraith, Emmanuel Saez and other RWER contributors.  But as I tend to be slow about such things, six months passed before the penny dropped and I thought to check the Real-World Economics Review subscriber list.  Sure enough, Rana Foroohar was a subscriber.   Read more…

Nominations received so far for Top Ten Economics Books of the Last 100 Years

Listed below in order so far received are the nominations for the poll announced yesterday as follows.

A top ten list of economics books chosen by the RWER’s global community of economists would be useful for promoting its real-world commitment.  We can over the coming weeks create one here by taking part in a poll.

The poll will work like this.  You may nominate up to 10 books (first published after 1915) by leaving a comment below.  Remarks – which must be short – supporting your nominations are optional.  Nominations will remain open for several weeks, after which a “short list” of 40 or 50 titles will be announced and voting by PollDaddy will commence.   Each voter will have 10 votes.  Voting will remain open for several weeks, before the “Top Ten Economics Books of the Last 100 Years” will be announced.

Nominations received after 31 hours  – Please add books to this list by leaving a comment below.
Read more…

Nominations for the Top Ten Economics Books of the Last 100 Years

from Edward Fullbrook

A top ten list of economics books chosen by the RWER’s global community of economists would be useful for promoting its real-world commitment.  We can over the coming weeks create one here by taking part in a poll.

The poll will work like this.  You may nominate up to 10 books (first published after 1915) by leaving a comment below.  Remarks – which must be short – supporting your nominations are optional.  Nominations will remain open for several weeks, after which a “short list” of 40 or 50 titles will be announced and voting by PollDaddy will commence.   Each voter will have 10 votes.  Voting will remain open for several weeks, before the “Top Ten Economics Books of the Last 100 Years” will be announced.

To get things started I am nominating the nine post-1915 books from Lars Syll’s Top Ten Economics Books.   Read more…

The Fisher – Becker Curio

from Edward Fullbrook

Yesterday evening  Merijn Knibbe put up this comment on Lars Syll’s post Utility maximization — explaining everything and nothing.

One of the features of the utility model is that it ´explains´ the downward sloping demand curve, a cornerstone of economics. Which means that neoclassical demand theory seems a pretty coherent building with sound foundations.


It does not explain the downward sloping demand curve. It is only consistent with this curve. And in 1962 Gary Becker showed, in an article called ´Irrational behavior and economic theory´, that many models can ´explain´ a downward sloping demand curve when money is limited, including the throw of a dice. Ockhams razorblade requires us to use the simplest model…,%2520Irrational%2520Behavior.pdf

Becker himself seems not to have grasped the implications of his article, which shredded neoclassical demand theory. Accepting that demand curves very often slope downwards does not mean that one has to accept utility theory.

My paper (  “An Intersubjective Theory of Value”, in Intersubjectivity in Economics: Agents and Structures, editor Edward Fullbrook.  London and New York: Routledge, 2002, pp. 273-299, includes a subsection on the theoretical anomaly noted by Gary Becker in his 1962 paper.  But that anomaly had been noted with somewhat greater depth and sophistication by Irving Fisher in 1920. Neither economist, however, was capable of understanding the profound significance of the anomaly, because to do so requires a bit of abstract algebra, which, unfortunately, is not part of the economist’s standard tool kit.  Below is the relevant section form my 2002 paper.  The first part of that paper includes a gentle introduction to the mathematical ideas missing from Fisher’s book and Becker’s paper.  Read more…

“plunged willy nilly into the study of economics”

February 3, 2016 1 comment

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.

Read more…

The 1% Curse: What can be done about it? – Oxfam graphics

January 19, 2016 1 comment

from Edward Fullbrook

The global inequality crisis is reaching new extremes. The richest 1% now have more wealth than the rest of the world combined. Power and privilege is being used to skew the economic system to increase the gap between the richest and the rest. A global network of tax havens further enables the richest individuals to hide $7.6 trillion. The fight against poverty will not be won until the inequality crisis is tackled.
An Economy for the 1%, Oxfam Briefing Paper, 18 January 2016

62 richest vs. poorest 50 percent 2000-15

Read more…

Real-World Economics Review Blog viewer statistics for 2015

December 31, 2015 Leave a comment

from Edward Fullbrook

I read that Blog World, in terms of viewer statistics, has been in a state of rapid collapse for several years now. But not the Real-World Economics Review Blog.  For the past four years its annual number of page views has been around 450,000.  In 2015 there have been 446,520 views, up slightly from the previous year.  To put that figure in some kind of a perspective, it is nearly half the number of downloads in 2015 of individual papers and whole issues of the Real-World Economics Review.

Here is a linked list the of the ten most viewed posts published in 2015.

10.  As it happened – Yanis Varoufakis’ intervention during the 27th June 2015 Eurogroup Meeting
Yanis Varoufakis

9. Randall Wray attacks “debt-free-money cranks” based on sloppy arguments
Norbert Häring

Read more…

The Fed’s corruption of the economics profession

November 1, 2015 4 comments

from Edward Fullbrook

Asad Zaman has called my attention to a long article in the Huffington Post that initially appeared six years ago, but is worth rereading today as a reminder of the task faced by those desiring to turn economics into a more honourable pursuit.  Here are few passages from the article.

Priceless: How The Federal Reserve Bought The Economics Profession

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.


This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed’s thrall, the economists missed it, too.


One critical way the Fed exerts control on academic economists is through its relationships with the field’s gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll — and the rest have been in the past.

Read more…

The Counterintuitive Problem

October 19, 2015 11 comments

from Edward Fullbrook

Keynes argued that markets often create inaccurate expectations of economic reality which they then act upon thereby changing reality. This reflexivity that Keynes identified as central to capitalist markets is the opposite of the basic process described by traditional economic theory, both in Keynes’ day and in our own, whereby it is assumed that market expectations are determined by reality rather than one of reality’s determinants.

For most people Keynes’ theory of market expectations, like his theory of aggregate demand, is counterintuitive, and therefore difficult to elucidate and popularize sufficiently to become part of public discussion.   Read more…

Gender-gap in prime-age employment in advanced economies in 2014

Gender Gap in Prime-Age Employment, Advanced Economies 2014

Nicholas Buffie at the Center for Economic and Policy Research has a blog post about this chart.

Key member of Swedish Academy of Sciences calls for immediate suspension of the “Nobel Prize for Economics”

October 11, 2015 20 comments

Bo Rothstein, an important member of the Royal Swedish Academy of Sciences, has today in Sweden’s most widely read newspaper called for an immediate declaration of a moratorium on the awarding of Sveriges Riksbank Prize for Economics in the name of Nobel and the Nobel Foundation.

Rothstein’s article argues that today with increasing success, economics as commonly taught in universities and endorsed by most winners of the economics prize promotes corruption in societies around the world.  Therefore he concludes that the Nobel Foundation’s awarding the economics prize is “in direct conflict with what Alfred Nobel decreed in his will.”

“I will,” writes Rothstein, “therefore now take the initiative in this matter.”

Below is a Google-translation of Rothstein’s article.  If someone can provide us with a better translation, we will post it.

The Prize in contravention of the spirit of Nobel’s will

Can contribute to increased corruption. Multiple independent research shows that those who study economics are more prone to corruption. And the behavior seems to be an effect of education. A price that risk contribute to increased corruption in the world is in conflict with the spirit of Nobel’s will, writes political science professor Bo Rothstein.   

Read more…

“Is there anything worth keeping in standard microeconomics?”

April 14, 2015 10 comments

from Edward Fullbrook

For me three economists stand out historically as having been the most effective at building resistance to the dominance of scientism in economics.  Keynes of course is one, and the other two are Bernard Guerrien and Tony Lawson, Guerrien because he was the intellectual and moral force behind Autisme Economie which, among other things, gave rise to the RWER; and Lawson because his papers, books and seminars have inspired, joined and intellectually fortified thousands.

It is notable that all three of these economists were or were on their way to becoming professional mathematicians before switching to economics.  When still in his twenties, Keynes’ mathematical genius was already publicly celebrated, most notably by Whitehead and Russell, and he had already published what was to become for his first discipline a classic work.  Guerrien’s first PhD was in mathematics, and Lawson was doing a PhD in mathematics at Cambridge when its economics department lured him over in an attempt to boost its mathematical competence.

The significance for me of Keynes, Guerrien and Lawson being mathematicians first and economists second is that it meant that they were not even for an hour taken in or intimidated by the aggressive scientism of neoclassical economists, and this has enabled them to write analytically about the dominant scientism with a quiet straightforwardness that is beyond the reach of most of us.

An example of this kind of writing that I am talking about is the short essay below that in 2002 Guerrien published in what is now the Real-World Economics ReviewRead more…

French economics needs you to sign this petition

February 26, 2015 1 comment

Where is our economic system going? What about our societies? How did we get here? And what next?

The current situation reveals not only an economic crisis but also a deep crisis of economic thought. There are many causes for this situation, and solutions can only be found through theoretical, practical and political inventiveness with our critical faculties to the fore. But, whilst such voices do exist, they have been silenced as far as orthodox economics is concerned. Simply put, there are profoud institutional barriers to the emergence and presentation of original thinking, but this blocked creativity could be released through a simple and immediate political solution. Establishing in French universities a new section, entitled Economics and Society, would allow a new way of thinking in economics.

Madam Minister, you recently decided to create this new section promoting the study of economic facts with a renewed perspective within rather than apart from social sciences. You did so because you know how much the research in economics and its teaching, but also public debate, are suffocated by the monopoly of ideas imposed by a dominant school of thought that failed to anticipate or even to allow for, let alone understand and respond to this crisis.
The proposal for this new section, and your commendable approval for it, unleashed such a backlash from the established orthodoxy that it seemed to persuade you to withdraw your support.
For these reasons, by reaffirming your support for this petition for pluralism in economics, we demand that you publish the decree that you already signed in order finally to create this new section.

Economics needs pluralism now!

You can sign this petition here

4,559 people have already signed it, but they need lots more.  You can read the names at the petition sight.

Scholars’ Appeal for Greece – please sign

February 2, 2015 135 comments

from Edward Fullbrook

I have been asked to circulate this appeal.  You may sign it by leaving your name and if appropriate your affiliation as a comment to this post.  Please do not comment further on this post as it will make the collection of the signatures more difficult.

Scholars’ Appeal for Greece.

We the undersigned call on the governments of Europe, the European
Commission, the European Central Bank and the IMF to respect the decision
of the Greek people to choose a new course and to  engage the new
government of Greece in good faith negotiations to resolve the Greek debt.

The government of Greece is correct to insist on new policies because the
previous policies have failed.  They have not brought economic recovery.
They have not brought financial stability.  They have not brought jobs or
foreign investments. They have stressed and damaged Greek society and
weakened Greek institutions. There is therefore no value in that approach
and no progress to preserve. We urge Greece’s European partners to accept
this reality, without which the new government would never have been
elected.  Read more…

“A safe pair of hands”

Nicholas Otty, an artist friend of mine in France, sent me this photo of a painting that he recently finished and which I think is available for purchase.  Click on the image to enlarge.

Greenspan by Nicholas Otty

Seeking short summaries of major works in economics

December 30, 2014 10 comments

from Edward Fullbrook

In 2014 one post on this blog was viewed more than twice as many times as any other post, nearly ten thousand.  It is Asad Zaman’s Summary of the Great Transformation by Polanyi.  Although it was posted back in late 2013, it continues to attract viewers at a rate that every month places it in the ten most viewed posts, and in recent months its download rate has even been growing.

So how do we account for the extraordinary success of Zaman’s post?   Part of the credit is due of course to the quality of Zaman’s writing and to his reputation.  But surely there is more to it than that, and three possibilities have occurred to me.  One, which I reject, is that it is the name Polanyi which attracts so many readers.  Another is that a network of links has been created leading people, most likely students, to Zaman’s post.  But after examining extensive site data I have found no evidence that such links exist.  A third possibility, and the one in which I am inclined to believe, is that it is the idea of a short (blog-post-length) summary of a famous work that attracts the readers and which lends itself to discovery through search engines. I can see how this might especially be appealing to students who education is structured to not only keep them away from all primary sources, but also to deny them direct summaries of important works.

So banking on the third explanation, I am extending a broad invitation.  I would like over the coming year for the RWER Blog to publish a series of short (750 words or less) summaries of famous works in economics.  Initially at least, I am interested in publishing only one such summary per work. So if you are interested in writing one, you should first clear the possibility with me at

If over the coming year we establish a small library of these major work summaries, then there is a good chance that network effects will lead to download rates for individual summaries that exceed that of Zaman’s Polanyi to date.