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RWER issue 60

June 20, 2012 10 comments

real-world economics review

Subscribers: 20,120                      Subscribe here                            ISSN 1755-9472
a journal of the World Economics Association (13 months old; 10,099 members)
back issues at www.paecon.net recent issues: 59 58 57 56  55 54 53 52 51 50

Issue no. 60
, 20 June 2012

http://www.paecon.net/PAEReview/issue60/whole60.pdf
You can download the whole issue as a pdf document by clicking
here

In this issue:

Neo-classical economics:          2
A trail of economic destruction since the 1970s
Erik S. Reinert        download pdf

The asymptotes of power          18
Shimshon Bichler and Jonathan Nitzan       download pdf

The Greek financial crisis and a developmental path to recovery          54
Nikolaos Karagiannis and Alexander G. Kondeas       download pdf

Open peer review, open access and a House of Commons report          74
Grazi Ietto-Gillies       download pdf

Llimits to growth and stochastics          92
Nicolas Bouleau       download pdf

Democracy and sustainable development          107
Peter Soderbaum       download pdf

Rethinking macroeconomics in light of the US financial crisis          120
Victor A Beker       download pdf

Marginal productivity theory of the price of capital:
an historical perspective on the origins of the codswallop          139
Roy H. Grieve       download pdf

Past Contributors, etc.          150

1. Germany’s beggar-thy-neighbour wages policy and 2. Shrinking the financial sector to its 1970s pre-bubble size

June 18, 2012 Leave a comment

The above and related issues arise in two papers in the current issue 59 of the Real-World Economics Review

Matías Vernengo and Esteban Pérez-Caldentey, “The euro imbalances and financial deregulation: A post-Keynesian interpretation of the European debt crisis” http://paecon.net/PAEReview/issue59/VernengoPerez59.pdf 
and
Robin Pope, “Public debt tipping point studies ignore how exchange rate changes may create a financial meltdown” (co-author Reinhard Selten) http://paecon.net/PAEReview/issue59/PopeSelten59.pdf

 Vernengo, Pérez-Caldentey and Pope all  agree on the need for: 

(i) fiscal stimulus while the private sector deleverages, 

(ii) inter-country fiscal transfers to losers in a global downturn in order to reduce contagious adverse aggregate demand effects, 

(iii) re-regulation of the financial sector to aid in averting future financial bubbles, and 

(iv) an absolute rise in German wages – though for different reasons.
Robin Pope: in order to try to curb the dramatic increase in inequality in Germany between the upper echelon and the average German worker that has occurred over the past decade, an increase that damages democracy and damps internal demand.
Matías Vernengo and Esteban Pérez-Caldentey: in order to reverse the dramatic narrowing of the gap between wages in Germany and non-core countries that occurred over the past decade, a reversal that they believe would eliminate Germany’s dramatically increased export surplus to non-core countries that occurred over this same decade plus.

On where the three disagree, see their extremely interesting exchange below, and do, if inclined, append your comments.  Read more…

The Pope, Vernengo and Pérez-Caldentey Discussion

May 17, 2012 Leave a comment

from Robin Pope,  Matías Vernengo and Esteban Pérez-Caldentey

Below is an extremely interesting exchange between the authors of two papers in the current issue of the Real-World Economics Review.

Matías Vernengo and Esteban Pérez-Caldentey, “The euro imbalances and financial deregulation: A post-Keynesian interpretation of the European debt crisis” http://paecon.net/PAEReview/issue59/VernengoPerez59.pdf

and

Robin Pope,  “Public debt tipping point studies ignore how exchange rate changes may create a financial meltdown” (co-author Reinhard Selten) http://paecon.net/PAEReview/issue59/PopeSelten59.pdf 

—————————————————————————————————————–

Here is an exchange on the paper, “The euro imbalances and financial deregulation: A post-Keynesian interpretation of the European debt crisis”

Robin, Matías, Esteban Interchange, collated 9th May 2012
order:
1) Robin comments on Matías and Esteban’s RWER article and relatedly adds a 2nd comment on Trond Andresen’s RWER article
2) Matías responds
3) Robin rejoinders
4) Esteban objects to austerity
5) Robin agrees austerity is the wrong policy
6) Esteban objects to austerity for Spain
7) Robin makes concrete for Spain the non-austerity proposal presented in her joint RWER Tipping Points paper with Reinhard Selten
8) Esteban objects to Robin highlighting a basic similarity in the modeling of him and Matías with that of Ken Rogoff
9) Robin is intransigent
10) Esteban sees the problem as external trade imbalances
11) Robin models with reverse causation to Esteban and Matías and Ken Rogoff – sees the problem as bubble finance causing unhealthy trade imbalance
12) Esteban holds by the current account imbalance as the causal direction
13) Robin grants that there is some two-way causation
14) Esteban sees a deficit balance of payments as a constraint
15) Robin sees no hard constraints
16) Robin beckons RWER readers to her and Reinhard Selten’s verdict in favour the imperfect euro and the dangers of not shifting to an imperfect single world currency
17) Esteban argues for making the euro feasible
18) Robin argues for the euro already being feasible
19) Matías and Esteban’s 4-point Position Summary with Robin’s responses

1 Robin Pope
In their RWER paper on Euro c, Matías Vernengo, Esteban Pérez-Caldentey propose that Read more…

20,097, 10,749 and 652

May 10, 2012 Leave a comment

Dear Subscriber,

The real-world economics review now has 20,097 subscribers.

10,749 of them have not yet joined the World Economics Association (WEA).

Next week on the 16th the WEA will be one year old.

If 652 of those 10,749 were to join the WEA between now and then, the WEA will have 10,000 members on its first birthday.

Yes, I know 9,348 in its first year of existence is amazing, but 10,000 sounds even more so.

If you are one of the 10,749, Read more…

Forbes’ update on the state of plutonomy or “democracy for the few”

March 30, 2012 15 comments

from Edward Fullbrook

The current Forbes, the bi-weekly of The One Percent, features an update on the current state of what it, like Citigroup, calls plutonomy.  Also called by its insiders “democracy for the few”, this is the basic economic-political reality of our time, which one-percenters chat about daily and which the rest of us generally pretend doesn’t exist.  Skeptics of the analysis of plutonomy offered in “The Political Economy of Bubbles” in the current issue of RWER are encouraged to read Forbes’ plutonomy update.   Below is a taster. 

The new “us versus them” is not like the racism of colonial times. This is starkly different. It’s the 99% versus the 1%, . . . Read more…

The ergodic axiom: Davidson versus Stiglitz and Lucas

March 28, 2012 35 comments

Contemporary neoclassical economists proceed under the assumption that as concerns the economy there exists a predetermined reality that can be fully described by “unchanging objective conditional probability functions”.  This is called the ”ergodic axiom”, and its current supporters include Joseph . Stiglitz and Robert Lucas.  In the anti-scientism spirit of Keynes, Paul Davidson has long campaigned against the use of the ergodic axiom, but never so tellingly as in his most recent paper, Is economics a science? Should economics be rigorous? It appears in the current issue of the Real-World Economics.  Here is one section from this paper.

The ergodic axiom 

First, let us take up the ergodic – nonergodic stochastic process distinction.  Paul Samuelson [1969] has written that if economists hope to move economics from “the realm of history” into “the realm of science” they must impose the “ergodic hypothesis” on their theory[1].  In other words Nobel Prize Winner Paul Samuelson has made the ergodic axiom the sine qua non for the scientific method in economics. Lucas and Sargent [1981] have also claimed the principle behind the ergodic axiom is the only scientific method of doing economics. 

Following Samuelson’s lead, most economists (e.g., Cochrane, Stiglitz, Mankiw, M. Friedman, Scholes, etc) and economic textbook writers either implicitly or explicitly have assumed that observable economic events are generated by an ergodic stochastic process.   Read more…

Plutonomy Bubble Number Three

March 24, 2012 15 comments

The herd instinct and the common theory

March 20, 2012 4 comments

Below are two thought-provoking, stand-on-their-own sections from Patrick Spread‘s paper “Science and Support: The Struggle for Mastery in Economics” in the new issue of RWER. 

The herd instinct

Fullbrook (2010a, p. 102), in the quotation above on page 3, refers to the AEA and neoclassical economists as ‘the old herd.’ References to ‘the herd instinct’ are fairly common in academic literature but its nature is never specified. The phenomenon is easily understood in terms of support-bargaining. An individual advances an idea that looks likely to advance the interests of himself, or herself, and his or her associates. Read more…

The prescription drugs bubble

March 15, 2012 Leave a comment

Below, from the new issue of RWER, is an especially interesting section from the lead paper, “Public debt tipping point studies ignore how exchange rate changes may create a financial meltdown”, by Robin Pope and Reinhard Selten.   Read more…

“toxic and destructive” Goldman Sachs and the Obama administration

March 15, 2012 13 comments

from Edward Fullbrook

As you may have heard in the news, yesterday one of the key directors of Goldman Sachs, Greg Smith, published in the New York Times his long letter of resignation.  It begins:

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

Given the degree of attention that the international media is today giving this mini event, it seems appropriate to republish here a table from my RWER paper, published on Monday, “The Political Economy of Bubbles”.  The table below, which is largely based on an article by fflambeau, details 32 relationships, financial and otherwise, between Goldman Sachs people (“morally bankrupt” says Smith) and the Obama Administration. Read more…

The Plutonomy Reports

March 14, 2012 1 comment

from Edward Fullbrook

On this blog, posts dealing with plutonomy have consistently been the most heavily viewed. Given this interest, here is one of several sections on plutonomy from my paper “The Political Economy of Bubbles” in the new issue of Real-World Economics Review. It is centered on the three Citigroup Plutonomy Reports. Read more…

RWER issue 59

March 12, 2012 27 comments

real-world economics review

Subscribers: 17,500+                                                             ISSN 1755-9472
– a journal of the World Economics Association (9 months old; 8,024 members) 
back issues at www.paecon.net    recent issues: 58 57 56 55 54 53 52 51 50

Issue no. 59, 12 March 2012                    

You can download the whole issue as a pdf document by clicking here  

In this issue:   Read more…

Richard Koo’s RWER paper “has gone viral on the Web” says the New York Times”.

December 28, 2011 3 comments

Richard Koo’s RWER paper The world in balance sheet recession: causes, cure, and politics already looks set to become a classic.  In its first two weeks it was full-text downloaded over 30,000 times from www.paecon.net.  Koo’s paper, reports the New York Times, “has gone viral on the Web”

Here are some key passages from Koo’s paper.  Read more…

Robert McMaster: “neuroeconomics’ empirical basis is fundamentally underdetermined”

December 26, 2011 1 comment

Robert McMaster’s paper “Neuroeconomics: A sceptical viewin the current issue of RWER outlines neuroeconomics claims and scrutinises them from a non-neoclassical perspective.  He argues that “neuroeconomics’ empirical basis is fundamentally underdetermined” and that “the framing of ‘economics in ‘neuroeconomics’ is profoundly reductionist and incapable of providing the explanatory depth its proponents claim.”  McMaster’s critique focuses on the work of Colin Camerer, P. W. Glimcher, D. Ross, M. Vercoe and P. J. Zak.  Below are three key passages from the paper.  Emphasis in bold has been added by the blog editor. Read more…

RWER issue 58: Peter Radford

December 12, 2011 4 comments

Ethics in economics – Where is it?  
Peter Radford     download pdf   

Read and leave comments here  

And register for the WEA online conference: Economics in Society: The Ethical Dimension

RWER issue 58: Julie Nelson

December 12, 2011 Leave a comment

A problem-centered and student-centered approach 
to teaching pluralist economics
Julie A. Nelson          download pdf    

Read and leave comments here

RWER issue 58: Richard Koo

December 12, 2011 52 comments

The world in balance sheet recession: causes, cure, and politics 
Richard C. Koo      download pdf                   

Read and leave comments here

RWER issue 58: Bill Lucarelli

December 12, 2011 1 comment

A new international Bretton Woods System? 
Bill Lucarelli         download pdf      

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RWER issue 58: Jamie Morgan

December 12, 2011 Leave a comment

Ethos and reform of finance systems, a tentative argument 
Jamie Morgan   download pdf

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RWER issue 58: Jorge Buzaglo

December 12, 2011 2 comments

The Eurozone crisis: Looking through the financial fog with Keynesian glasses
Jorge Buzaglo      download pdf

Read and leave comments here