Archive for the ‘Uncategorized’ Category

The inconsistencies of intellectual property

March 22, 2019 Leave a comment

from Herman Daly

Of all things knowledge is that which should be most freely shared, because in sharing it is multiplied rather than divided. Knowledge is a non-rival good and should be also non excludable. Yet, as already noted, our trade theorists have rejected Thomas Jefferson’s dictum that “Knowledge is the common property of mankind” in exchange for a muddled doctrine of “trade related intellectual property rights” by which they are willing to grant private corporations monopoly ownership of the very basis of life itself–patents to seeds (including the patent-protecting, life-denying terminator gene) and to knowledge of basic genetic structures.

The argument offered to support this enclosure of the knowledge commons is that, unless we provide the economic incentive of monopoly ownership for a significant period of time, little new knowledge and innovation will be forthcoming. Yet, as far as I know, James Watson and Francis Crick, who discovered the structure of DNA, do not share in the patent royalties reaped by the second rate gene-jockeys who are profiting from their monumental discovery. Nor of course did Gregor Mendel get any royalties – but then he was a monk motivated by mere curiosity about how Creation works! Nor did Jonas Salk try to patent the polio vaccine. He thought it would be like trying to patent the sun.  Read more…

How to teach economics if you have a dissenting perspective

March 21, 2019 5 comments

from Lars Syll

teaching-economics-6-638Issue #1: How do you teach the introductory economics courses if you have a dissenting perspective? Mankiw lays out three alternatives, teaching the mainstream and suppressing your own views, teaching minority or fringe views (i.e. your own), or not teaching introductory econ at all. He says the second option is “pedagogical malpractice” … I opted for an approach neither of them consider, to present mainstream economics in the third person: this is what that particular group thinks. Allow for a critical distancing, which is not the same as critique. I didn’t write “this stuff is garbage”, but “here are the assumptions that conventional economists make that distinguish their approach from others.” Whenever possible, I point out where other disciplines differ, and while I encourage students to judge for themselves, I don’t pressure them into adopting any one point of view. This is called critical thinking, and it barely exists in the world of economics textbooks, which proselytize shamelessly. Read more…

The logic of artificial scarcity at work

March 21, 2019 4 comments

from Jason Hickel

We can also see the logic of artificial scarcity at work in the realm of consumption. Industrialists who fear that people’s existing needs are too limited to absorb capitalism’s immense productive output must seek to create new needs, or else the juggernaut will grind to a halt. This is accomplished by various means. One is to expand desires through sophisticated advertising campaigns – and to extend these campaigns into all public and private spaces – manipulating people’s emotions and psychology to create new “needs” for products that promise to grant them a sense of self-esteem, status, identity, sexual prowess and so on that did not exist before and indeed do not have to exist. Another is to create products that are designed to break down quickly (like laptops and smart phones today) or become rapidly obsolete (as with the rise of throwaway fashion), and which therefore must be replaced more frequently than would otherwise be necessary. Another is to preclude the development of public goods in order to ensure that people have no choice but to purchase private alternatives: for instance, blocking the construction of effective public transportation systems in order to ensure a steady stream of demand for the automobile industry.

On top of this, a significant portion of consumption in highly-industrialized countries is driven by an artificial scarcity of time. Read more…


March 20, 2019 3 comments

from Peter Radford

I want to note, with sadness, the death of Alan Krueger who was one of those economists undaunted by the existence of the real world and all its complexity, and had the courage to present conclusions based on empirical work rather than on pure theory.

Others will write more cogently than I can about his impact on the profession, so I will simply note that his work, with David Card, on debunking the notion that a rise in the minimum wage will always cause higher unemployment ended the anti-social grip of textbook economics on a very key issue for tens of millions of his fellow citizens.  And ended that grip on a positive note.

So much did that research roil the ideologically pristine waters of mainstream economics that no less a character than Nobel prize winner James Buchanan wrote in the Wall Street Journal (where else?), that Krueger and Card were undermining the very credibility of economics as a discipline and that they and their allies were nothing but “a bevy of camp-following whores.”

Such is the sensitivity of the mainstream to criticism.  Such is its devotion to data driven thought.  Such is its commitment to scientific discovery. Read more…

RWER special issue: Economics and the Ecosystem

March 20, 2019 Comments off

Real-World Economics Review – issue no. 87

Economics and the Ecosystem

download whole issue

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.
Click here for the details.

Beyond behavioral economics: the self-governance of nudging

from Maria Alejandra Madi

Looking back, after the Second World War, new theoretical and applied work in economics fostered empirical techniques that included structural estimation, the development of input-output methods and linear programming. Among the theoretical advances, the Keynesian revolution, the mathematical modeling of the business cycle, game theory, dynamic modeling, new models of consumer behavior and general equilibrium analysis can be highlighted.

What is significant about these changes is that, as theoretical and empirical work became more formal and mathematical, the conceptions of economic theory and of its relationship to various types of applied work changed. “Measurement without theory”, as Rutledge Vining explained, means that empirical work was needed in order to discover the appropriate theory. The ensuing debates were dominated by this view, that also included Milton Friedman’s contribution that turned out to be one of the most widely read methodological essays in economics.

By the 1970s, mainstream economics was centered on mathematical modeling of maximizing agents and econometric models were widely spread in applied work. Consequenlty, economics was becoming more methodologically homogeneous despite the protests from heterodox economists. In this setting, new theories for specific fields in economics were developed. As Backhouse and Cherrier claimed, there has been a process of unification and fragmentation in economics.  read more

Labor’s share — the ‘stylized fact’ that isn’t a fact at all

March 19, 2019 5 comments

from Lars Syll

jonvollrAccording to one of the most widely used textbooks on mainstream theories of economic growth, one can for the United States “calculate labor’s share of GDP by looking at wage and salary payments and compensation for the self-employed as a share of GDP. These calculations reveal that the labor share has been relatively constant over time, at a value of around 0.7.”

But is this “classic stylized fact” — that the labour share is relatively constant over time at around two-thirds — really true? One would, I guess, certainly have doubts after reading Piketty and taking part in the present discourses on economic inequality.

Sometimes a little data can do wonders. So let’s have a look at a couple of graphs that give us some: Read more…


March 17, 2019 17 comments

from Peter Radford

I am not quite sure what to make of the phrase “radical uncertainty”.  It pops up in most discussions of Keynes as being a critical, if not the critical, point of departure of his thinking from the silliness we know as classical economics.

Is radical uncertainty a redundant statement?  If something is uncertain, what is it that can make it radically so?  Surely the whole point of uncertainty is that we have no idea just how radical that lack of knowledge may be.  Worse, how do we identify uncertainty?  Isn’t it simply a concept that describes our inherent lack of knowledge?

In any case, it is precisely because of uncertainty that I find Keynes so appealing.  Whether or not he dealt with it correctly is another matter, but at least he was sensible enough to eschew the nonsense embraced by others that economics can be theorized about as if humanity had all the knowledge it will ever have right now.

Imagine the lunacy attaching to the notions underpinning mainstream economics.  The implication is that humanity has access to the future with sufficient acuity not only to reduce it to manageable proportions in the present, but to place knowable limits on it.  And then, to make things even more absurd, to be able to calculate and make “rational” decisions based upon this other-worldly capacity. Read more…

How to make economics a relevant science again

March 16, 2019 21 comments

from Lars Syll

Economists are struggling to explain recent productivity developments, the implications of rising inequality, the impact of persistently negative interest rates in the eurozone … and the sudden slowdown in European growth …

None of this is a huge surprise, given the profession’s embrace of simplistic theoretical assumptions and excessive reliance on mathematical techniques that prize elegance over real-world applicability …

perfectly-good-econ-theoryAll of this should tell economists that there is plenty of room for improvement, and that they need to expand the scope of their analysis to take into account human interactions, distributional effects, financial-economic feedback mechanisms, and technological change. But this cannot just be about devising new analytical models within the field; economists also must incorporate insights from other disciplines that the profession has overlooked.

A discipline long dominated by “high priests” must now adopt a more open mindset … Without significant adjustments, mainstream economics will remain two steps behind changing realities on the ground, and economists will be risking a further loss of credibility and influence. In an era of concern about climate change, political upheavals and technological disruption, the shortcomings of mainstream economics must be addressed posthaste.

Yes indeed — what shall mainstream economists do when the modelling​ assumptions made are shown to be harmful and not even remotely matching reality? Read more…

Adam Smith’s bad history leads to bad economics

March 15, 2019 2 comments

from Asad Zaman

Guest Post by Donni Wang [author details at bottom of post]. Republished from The Economic Historian blog: “No Go from the Get Go: Adam Smith’s Bad History, Lessons from Ancient Greece, and the Need to Subsume Economics” – She is a historian, and argues here that a false history which portrays progression and progress actually seals off alternatives and choices which we could, and indeed need to, make today. Correcting Adam Smith’s views about history of mankind, using lessons from Ancient Greece, thus creates new possibilities for us today.

WORLDVIEWS THAT gain traction tend to be comprehensive in nature. They account for a wide range of phenomena that define the human condition, one of which being the changes that occur to society over time. This is true also for capitalism as an extensive body of thought. Although there is much emphasis placed on the modern epoch that features the rise of the industrial nation in the West, the weltanschauung of capitalism does supply a neat story of human development that extends back to earlier periods.

The obvious source for this narrative is to be found in the writing of Adam Smith.  Having been rightly credited as the father of capitalism, Smith has contributed much to the overall coherence of the market system by reinforcing it with a supportive philosophical foundation. In fact, his narrative of the past, which is still being circulated in contemporary textbooks and popular discourse, has not only rationalized the ascent of market forces in 18th century Europe, it also validated the major assumptions that undergird orthodox economic thinking today.

The historical account proffered by Smith, however, does not hold up even to the most basic test. read more

Wars have become too cheap to boost growth

March 15, 2019 11 comments

from Shimshon Bichler and Jonathan Nitzan

This week, with the Federal Reserve Banks of New York and Atlanta anticipating sharply lower GDP growth for 2019:Q1, President Trump presented a ‘Budget for A Better America’, calling for a smaller government and a bigger military. Read more…

Your model is consistent? So what?

March 14, 2019 12 comments

from Lars Syll

In the realm of science it ought to be considered of little or no value to simply make claims about the model and lose sight of reality.

errorineconomicsThere is a difference between having evidence for some hypothesis and having evidence for the hypothesis relevant for a given purpose. The difference is important because scientific methods tend to be good at addressing hypotheses of a certain kind and not others: scientific methods come with particular applications built into them … The advantage of mathematical modelling is that its method of deriving a result is that of mathematical proof: the conclusion is guaranteed to hold given the assumptions. However, the evidence generated in this way is valid only in abstract model worlds while we would like to evaluate hypotheses about what happens in economies in the real world … The upshot is that valid evidence does not seem to be enough. What we also need is to evaluate the relevance of the evidence in the context of a given purpose.

Even if some people think that there has been a kind of empirical revolution in economics lately, yours truly would still argue that empirical evidence only plays a minor role in economic theory, where models largely function as a substitute for empirical evidence. The one-sided, almost religious, insistence on axiomatic-deductivist modelling as the only scientific activity worthy of pursuing in economics, still roosts the roost.  Read more…

% of children living in relative poverty – 36 countries

March 14, 2019 5 comments

A new mode of production?

March 13, 2019 9 comments

from Donald Gillies 

If a new mode of production is really going to supersede capitalism, then it is likely that we can find examples of this way of producing already coming into existence, though perhaps not yet in fully developed form. Paul Mason draws attention to a striking example, namely Wikipedia. This is what he says (p. 128):

“Wikipedia is the best example. Founded in 2001, the collaboratively written encyclopaedia has, at the time of writing, 26 million pages and 24 million people registered to contribute and edit – with about 12,000 people regularly editing and 140,000 people vaguely taking part. 

Wikipedia has 208 employees. The thousands who edit it do so for free. … With 8.5 billion page views per month the Wikipedia site is the sixth most popular in the world – just above Amazon the most successful e-commerce company on earth. By one estimate, if it were run as a commercial site, Wikipedia’s revenue could be $2.8 billion a year. 

Yet Wikipedia makes no profit. And in doing so it makes it impossible for anybody else to make a profit in the same space.”  Read more…

Brad DeLong admits neoliberal era has come to an end

March 12, 2019 12 comments

from Lars Syll

Should Democrats lean away from market-friendly stances and get comfortable with big government again? Should they embrace an ambitious 2020 candidate like Sanders and policies like the Green New Deal, or stick with incrementalists like former Vice President Joe Biden and more market-oriented ideas like Obamacare?

austerOne of the most interesting takes I’ve seen on this debate came from Brad DeLong, an economist at the University of California-Berkeley … one of the market-friendly, “neoliberal” Democrats who have dominated the party for the last 20 years …

Yet DeLong believes that the time of people like him running the Democratic Party has passed. “The baton rightly passes to our colleagues on our left,” DeLong wrote. “We are still here, but it is not our time to lead” …

Zack Beauchamp/Vox

Economists — in many ways separated from the ​life of ordinary people — are with their ‘the model is the message’ thinking particularly inclined to confuse the things of logic with the logic of things. But as we all know, neoliberalism is nothing but a self-serving con endorsing pernicious moral cynicism and gobsmacking ideological trash maintaining that unregulated capitalism is a ‘superlatively moral system’: Read more…

Econometric beasts of bias

March 11, 2019 4 comments

from Lars Syll

In an article posted earlier on this blog — What are the key assumptions of linear regression models? — yours truly tried to argue that since econometrics doesn’t content itself with only making ‘optimal’ predictions,” but also aspires to explain things in terms of causes and effects, econometricians need loads of assumptions — and that most important of these are additivity and linearity.

overconfidenceLet me take the opportunity to elaborate a little more on why I find these assumptions of such paramount importance and ought to be much more argued for — on both epistemological and ontological grounds — if at all being used.

Limiting model assumptions in economic science always have to be closely examined since if we are going to be able to show that the mechanisms or causes that we isolate and handle in our models are stable in the sense that they do not change when we ‘export’ them to our ‘target systems,’ we have to be able to show that they do not only hold under ceteris paribus conditions and a fortiori only are of limited value to our understanding, explanations or predictions of real economic systems.

Read more…

Migration and remittances: The gender angle

March 10, 2019 Leave a comment

from C. P. Chandrasekhar and Jayati Ghosh

The gender distribution of migrant workers has a macroeconomic impact – it affects both the level and the volatility of remittance inflows, as the Asian experience shows.

The gender distribution of cross-border migration obviously matters because women migrating for work face very different conditions from those of men migrants, whether in the source country, or in the process of travel or in the destination country. These are crucially affected by the gender construction as well as the nature of labour markets in both societies of origin and destination.

This is well accepted and now quite widely studied. However, the macroeconomic impact of such gendered migration has remained much less apparent and less analysed. Specifically, the impact of gendered migration on the sending of remittances is an issue that is often ignored, even though it can be very significant.

Read more…

Summers​ shameless assault on MMT

March 10, 2019 30 comments

from Lars Syll

First,​ it was Paul Krugman. Then came Kenneth Rogoff. And now Lawrence Summers has felt the urge to attack MMT and defend mainstream economics:

summersThere is widespread frustration with the performance of the economy … Altered economic conditions have led to the development of new economic ideas … And now, these new ideas are being oversimplified and exaggerated by fringe economists who hold them out as offering the proverbial free lunch: the ability of the government to spend more without imposing any burden on anyone …

Modern monetary theory is fallacious at multiple levels. First, it holds out the prospect that somehow by printing money, the government can finance its deficits at zero cost … Second, contrary to the claims of modern monetary theorists, it is not true that governments can simply create new money to pay all liabilities coming due and avoid default …

For neither the right nor the left is there any such thing as a free lunch.

Larry Summers

Now compare that to what the same Summers wrote​ just a couple of years ago: Read more…

Medicare for all is doable; most Americans want it

March 9, 2019 9 comments

Dean Baker

In Canada, everyone in the country is guaranteed access to health care by the government.

The same is true for France, the United Kingdom, Germany, Netherlands and every other country that we think of as comparable in terms of levels of wealth, democracy and economic development.

In spite of providing universal care, these countries also all spend much less on health care than the United States.

In Canada, per person spending is 60 percent what it is in the United States. In Germany spending per person is 56 percent and in the United Kingdom just 42 percent of what we spend.

And these countries all have comparable outcomes. People in other wealthy countries not only have longer life expectancies and lower infant mortality rates, they also have comparable outcomes when looking at more narrow health issues like treatment for cancer or heart disease.

The basic story is that we spend roughly twice as much per person as people in other wealthy countries and we have pretty much nothing to show for it in terms of better health. This is the context in which critics of Medicare for all are telling us it is not possible. Read more…

Inequality charts from the BBC

March 8, 2019 2 comments

Where are the millionaires?

(Figures in thousands, US$)

Source: Credit Suisse Global Wealth Databook 2018

Read more…