Archive for the ‘The Economy’ Category

Poll now open for you to vote for the “Top 10 Economics Books of the Last 100 Years”

May 25, 2016 Comments off

From your nominations over the past month, a short list of 50 books has been complied.   The poll will remain open for two weeks.  You may vote for ten books.  The books are listed in alphabetical order by author on your ballot below.   Read more…

Economists confuse Greek method with science

May 25, 2016 Leave a comment

from Asad Zaman and the WEA Pedagogy Blog

A well-known historian and philosopher of science Pierre Duhem reflects the typical Eurocentric attitude: “There is no Arabian science. The wise men of Mohammedanism were … faithful disciples of the Greeks, (and) … destitute of all originality.” It is amazing how prejudice can blind historians to the vast original Islamic contributions to mathematics, medicine, chemistry, optics, astronomy, as well as a wide range of technological developments. In contrast, Briffault in The Making of Humanity, writes that  “The experimental method of Arabs was by Bacon’s time widespread … throughout Europe. Science is the most momentous contribution of Arab civilization to the modern world.” Our focus in this essay is not on the injustice, but on the misunderstanding of science that results partly from minimizing the Muslim contributions.

By a strange paradox, while the accomplishments of modern science are bright as the sun, philosophical attempts to understand the nature of science and the scientific method remind us of the parable of the blind men and the elephant. Different schools of thought contend with each other, and each school has a fragment of the truth, but there is no coherent overall picture, and massive confusion prevails.  read more


A prize for public servants

Via June Sekera and the Public Goods Post website (see also below). This post is of course USA centered, but I’ll be glad to put up comparable posts for other countries. Ideas anybody?

The 2016 Samuel J. Heyman Service to America Medal finalists were announced this month. As described recently in The Washington Post, these medals honor civil servants who have performed breakthrough work in the public sector, resolving formidable challenges to public well-being. You are likely familiar with these challenges. Especially as they impact public health and the environment, they have made national headlines. But you probably have not heard about how a problem was solved or a public need met, because solutions are not considered newsworthy. For many of the public workers on this list, their contributions are being recognized for the first time. ….”


Dr. Burke Healey Department of Agriculture
“Halted the spread of the largest animal disease outbreak in U.S. history, an avian influenza virus that threatened human health, the poultry industry and the jobs of 1.8 million people.”

Background Avian Flu Outbreak Takes Poultry Producers Into Uncharted Territory | NPR

Thomas A. Mariani, Jr., Steven O’Rourke, Sarah Himmelhoch Department of Justice
“Secured a record $20.8 billion legal settlement against BP Read more…

Markets, power, and the distribution of income

May 25, 2016 1 comment

from David Ruccio

Joseph Stiglitz usefully explains that there’s more than one theory of the distribution of income. One theory, he writes, focuses on competitive markets (according to which “factors of production” receive their marginal contributions to production, the “just deserts” of capitalism); the other, on power (“including the ability to exercise monopoly control or, in labor markets, to assert authority over workers”).

In the West in the post-World War II era, the liberal school of thought has dominated. Yet, as inequality has widened and concerns about it have grown, the competitive school, viewing individual returns in terms of marginal product, has become increasingly unable to explain how the economy works. So, today, the second school of thought is ascendant.

I think Stiglitz is right: with the obscene levels of inequality we’ve seen emerge over the course of the past four decades, the notion of “just deserts” is being called into question, thereby creating space for other theories of the distribution of income to be recognized.

The only major problem with Stiglitz’s account is he leaves out a third possibility, an approach that combines a focus on markets with power, that is, a class analysis of the distribution of income.  Read more…

Friedman on the limited value of econometrics

May 24, 2016 1 comment

from Lars Syll

Tinbergen’s results cannot be judged by ordinary tests of statistical significance. The reason is that the variables with which he winds up, the particular series measuring these variables, the leads and lags, and various other aspects of the equations besides the particular values of the parameters (which alone can be tested by the usual statistical technique) have been selected after an extensive process of trial and error because they yield high coefficients of correlation. Tinbergen is seldom satisfied with a correlation coefficient less than 0.98. But these attractive correlation coefficients create no presumption that the relationships they describe will hold in the future. The multiple regression equations which yield them are simply tautological reformulations of selected economic data. Taken at face value, Tinbergen’s work “explains” the errors in his data no less than their real movements; for although many of the series employed in the study would be accorded, even by their compilers, a margin of error in excess of 5 per cent, Tinbergen’s equations “explain” well over 95 per cent of the observed variation.

As W. C. Mitchell put it some years ago, “a competent statistician, with sufficient clerical assistance and time at his command, can take almost any pair of time series for a given period and work them into forms which will yield coefficients of correlation exceeding ±.9 …. So work of [this] sort … must be judged, not by the coefficients of correlation obtained within the periods for which they have manipulated the data, but by the coefficients which they get in earlier or later periods to which their formulas may be applied.” But Tinbergen makes no attempt to determine whether his equations agree with data other than those which they translate …

The methods used by Tinbergen do not and cannot provide an empirically tested explanation of business cycle movements.

Milton Friedman

Getting high on interest rates: What’s new at the Fed

May 23, 2016 3 comments

from Dean Baker

The minutes from the most recent Federal Reserve Board Open Market Committee (FOMC) meeting indicate that many of its members are anxious to move forward with more interest rate hikes. The next hit could come as soon as June. This should have the country very worried.

Just for some basic orientation, the point of raising interest rates is to slow the economy and keep it from creating too many jobs. The members of the FOMC are worried that the labor market is becoming too tight, with the unemployment rate falling too low. This would give workers more bargaining power, allowing them to get larger wage gains, which could be passed on in higher prices, kicking off an inflationary spiral. If that doesn’t sound like the economy you see, then it’s probably because you have a better idea of the data than the folks at the FOMC.

Starting at the basics, by many measures the labor market is still far from recovering to its pre-recession level, in spite of a recovery that will soon be entering its eighth year. Most notably the employment to population ratio (EPOP), which is the percentage of adults with jobs, is still more than 3 percentage points below its pre-recession level.  Read more…

Still too big to fail

from David Ruccio

Here we are in 2016, almost eight years after the financial crash that brought the world economy to it knees (and ruined countless homeowners and threw millions of people out of work), and nothing has been done to solve the problem of Too Big to Fail banks.


In fact, as everyone knows (and as Stephanie Fontana points out), those banks are now ever bigger and the financial sector even more concentrated.   Read more…

Timo Boppart and Per Krusell are wrong: involuntary unemployment exists and does matter

May 22, 2016 5 comments

New Deal
Timo Boppart and Per Krusell have written an interesting but flawed article about the long run decline in the average hours worked. As they do not account for changes in involuntary unemployment and do not even seem to know the concept they are led to an understanding of their (interesting!) data which is at odds with reality Read more…

Engaging students in the WEA Online Conference on CAPITAL and JUSTICE

May 22, 2016 1 comment

from Maria Alejandra Madi

The WEA Online Conferences format, designed by Edward Fullbrook and Grazia Ietto-Gillies, makes full use of the digital technologies in the pursuit of the commitments included in the World Economics Association Manifesto: plurality, competence, reality and relevance, diversity, openness, outreach, ethical conduct, and global democracy. The WEA On-line Conferences seek to also engagegraduate and undergraduate students considering: (a) the variety of theoretical perspectives; (b) the range of human activities and issues which fall within the broad domain of economics; and (c) the study of the world’s diverse economies.

The current conference is CAPITAL ACCUMULATION, PRODUCTION AND EMPLOYMENT:Can We Bend the Arc of Global Capital Toward Justice?  It is being led by distinguished professors Gerson Lima and Jack Reardon. This conference focuses on various aspects of global accumulation, production and employment from a broader perspective of examining their interlinkages with other economic, social, and political processes. Concerns with social inclusion extend well beyond purely economic account of justice and fairness, since the degree of economic inequality also affects social cohesion and political stability, and can also have negative implications for economic growth and democratic institutions. Considering the current social and economic challenges, Peter Radford has suggested the need to constrain capital and make it work for all people. In his own words: ‘We can bend the arc of capitalism to our will if we wish”.

In truth, this conference calls for a deep examination of current power, politics and economics in a social context where democratic institutions are being threatened.  read more

CEO-to-worker pay ratios in the US

May 21, 2016 1 comment

from David Ruccio


The United States’ top 500 chief executive officers managed to capture 335 times the average worker’s wage last year, taking home $12.4 million on average, according to a new report by the AFL-CIO. That average CEO pay was a whopping 819 times the wage of a worker earning the federal minimum wage.

Here’s the list of the top 25 CEOs by pay—from Joe Kiani of Massimo Corp (at more than $199 million) to Jeff Immelt of GE (at just under $33 million):

Read more…

Making things matters. This is what Britain forgot

May 20, 2016 2 comments

from Ha-Joon Chang

It’s being blamed on the Brexit jitters. But the  that the latest figures reveal is actually a symptom of a much deeper malaise. Britain has never properly recovered from the . At the end of 2015, inflation-adjusted income per capita in the UK was only 0.2% higher than its 2007 peak. This translates into an annual growth rate of 0.025% per year. How pathetic this performance is can be put into perspective by recalling that Japan’s per capita income during its so-called “lost two decades” between 1990 and 2010 grew at 1% a year.

At the root of this inability to stage a real recovery is the serious imbalance that has developed in the past few decades – namely, the over-development of the UK financial sector and the atrophy of manufacturing. Right after the 2008 financial crisis there was a widespread recognition that the ballooning financial sector needed to be reined in. Even George Osborne talked excitedly for a while about the “march of the makers”. That march never materialised, however, and manufacturing’s share of GDP has stagnated at around 10%.   Read more…

The emergence of science

May 20, 2016 19 comments

from Asad Zaman and the WEA Pedagog Blog
{Continuation of previous post: Misconceived Project of Social Science}

WEA Pedagogy Blog | We welcome posts about your experiences and suggestions on teaching and learning economics, with a strong focus on methods leading to deep understanding of current real world economic issues.

Historical accidents have shrouded the emergence of science and the scientific method behind multiple veils of mystery. Misunderstanding the nature of science has led to seriously defective methodologies in modern social science, especially economics. The first barrier to understanding is created by Eurocentric history which states that roots of modern sciences originate with the Greeks. According to this account, the Muslims preserved Greek knowledge, and passed it on to Europe, without making any significant improvements. The Europeans took up the mantle of their Greek ancestors and have since made fantastic progress. The myth that “Europeans are unique in their capacity for rational and scientific thought” has been debunked effectively by many historians, notably Blaut in “Eight Eurocentric Historians.” Nonetheless, these ideas have been widely propagated, and permeate public consciousness.  read more

Krugman and ‘what Keynes really meant’

May 19, 2016 11 comments

from Lars Syll

krugmanPaul Krugman has often been criticized by people like yours truly for getting things pretty wrong on  the economics of  John Maynard Keynes.
When Krugman has responded to the critique, by himself rather gratuitously portrayed as about ‘what Keynes really meant,’ the overall conclusion is — ‘Krugman doesn’t care.’

Responding to a post up here on the blog, Krugman writes:

Surely we don’t want to do economics via textual analysis of the masters. The questions one should ask about any economic approach are whether it helps us understand what’s going on, and whether it provides useful guidance for decisions.

So I don’t care whether Hicksian IS-LM is Keynesian in the sense that Keynes himself would have approved of it, and neither should you.

The reason for this rather debonair attitude seems to be that history of economic thought may be OK, but what really counts is if reading Keynes gives birth to new and interesting insights and ideas.

No serious economist would question that explaining and understanding ‘what’s going on’ in our economies is the most important task economists can set themselves — but it is not theonly task.  And to compare one’s favourite economic gadget model to what ‘austerians’ and other madmen from Chicago have conjured up, well, that’s like playing tennis with the nets down, and we have to have higher aspirations as scientists. 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

CERN Discovers New Particle Called The FERIR

May 18, 2016 4 comments

from Steve Keen

CERN has just announced the discovery of a new particle, called the “FERIR”.

This is not a fundamental particle of matter like the Higgs Boson, but an invention of economists. CERN in this instance stands not for the famous particle accelerator straddling the French and Swiss borders, but for an economic research lab at MIT—whose initials are coincidentally the same as those of its far more famous cousin.

Despite its relative anonymity, MIT’s CERN is far more important than its physical namesake. The latter merely informs us about the fundamental nature of the universe. MIT’s CERN, on the other hand, shapes our lives today, because the discoveries it makes dramatically affect economic policy.

CERN, which in this case stands for “Crazy Economic Rationalizations for aNomalies”, has discovered many important sub-economic particles in the past, with its most famous discovery to date being the NAIRU, or “Non-Accelerating Inflation Rate of Unemployment”. Today’s newly discovered particle, the FERIR, or “Full Employment Real Interest Rate”, is the anti-particle of the NAIRURead more…

New WEA paperback: “Green Capitalism – the God That Failed” by Richard Smith

May 17, 2016 Leave a comment

Smith paperback

Buy this paperback from any Amazon or

download the eBook from the WEA Library.


Here are links to the book’s pages on the various Amazons
United States
United Kingdom


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…

What can Donald Trump teach us about the national debt?

May 16, 2016 2 comments

from Dean Baker

Many people might think that Donald Trump can only teach the country how to offend women, African Americans and a range of non-European ethnic groups. While that may be his area of expertise, it seems that his rants on dealing with debt may actually provide a teachable moment. As a result, the country, and possibly even the policy elites, may get a better understanding of when and how debt can pose a problem.

Trump first raised the debt issue a couple of weeks ago when he implied that as president he would negotiate discounts on US debt just like he did with many of his businesses that faced bankruptcy. In those cases, Trump could tell his creditors that if they didn’t make concessions, like accepting 50 cents on each dollar of debt, then he would go into bankruptcy. If a Trump business went into bankruptcy, the creditors might have to wait years to get anything and may end up with much less than the discount Trump proposed.  Read more…

Thought control in economics

from David Ruccio

No matter how many stories I tell them about thought control in economics, students and colleagues in other disciplines simply don’t believe me.

They don’t understand the restrictions on the professors who are hired in many economics departments, the narrow range of methods and perspectives published in the leading economics journals, the limits on economics research projects that actually receive funding, and even the strict surveillance of what can be taught to students in basic undergraduate and graduate economics classes. It’s beyond their imagination that mainstream economists do all they can—within their departments and in the wider discipline—to make sure other approaches (often referred to as heterodox economics and, often, noneconomics) are displaced to (and, in many cases, beyond) the margins.

So, it comes as no surprise to me—but it probably does to everyone outside of economics—that a senior lecture rat the University of Glasgow, Alberto Paloni [ht: sm], an expert in post-Keynesian theory, has been stopped from teaching a core degree module on macroeconomics.

This, after an essay in the Royal Economic Society newsletter specifically cited Paloni’s course as introducing a necessary pluralism into the teaching of economics:  Read more…

Economics and Technik

May 14, 2016 Leave a comment

from Robert Locke

Dave Taylor in a comment about David Ruccio’s post on this blog, April 26, 2016, “Minimum-wage machine,” talks about “Kuhn’s distinction between ‘revolutionary’ and ‘normal’ scientists, which I [Taylor] have consistently interpreted as (in Britain, anyway) a more familiar distinction between “fundamental” and “applied” science.” This distinction, as the late Ian Glover observes, is familiar “in Anglophone countries, [where] two “cultures, the arts and sciences are recognized.” In the science culture engineering is placed in an inferior place; UK scientists look down on engineering as a subject for the less brilliant and gifted.

Glover went on to note that in [Germany] rather than two cultures there are three: “ Kunst (like the arts), Wissenschaft (similar to science) and Technik (the many engineering and other making and doing subjects, representing practical know how  (Können),” but including scientific knowledge (Wissen).  Glover, I. (2013). “Bleak House: Pessimism about Management, Responsibility, and Society in the Early Twenty-First Century. Work. Employment, and Society, April. 1-10.  Read more…


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