According to the data in the chart by Max Roser, Brian Nolan, and Stefan Thewissen, every decile of the Greek population lost ground after the global financial crash and austerity measures were imposed in that country.
from Asad Zaman
My article on the limits of reason was published in Express Tribune recently (Monday April 13, 2015). This essay shows that logic is limited in its ability to arrive at a definite conclusion even in the heartland of mathematics. Pluralism is required to cater for the possibility that both Euclidean and non-Euclidean geometries represent valid ways of looking at the world. The world of human affairs is far more complex. In order to study and understand societies, one must learn to deal with a multiplicity of truths. This argument, which is related to the first, has been made in my article “Tolerance and Multiple Narratives” which was published in Express Tribune earlier (March 29, 2015). These ideas form part of the background for supporting the drive for pluralism in our approaches to economic problems.
Eighteen scientists published an alarmist but optimistic, though pretty ‘western’, ecomodernist manifesto. It’s main message: considering the still growing population of spaceship earth the only solutions of the problem of combining reasonable prosperity with at least a little real nature as well as an end to global warning are urbanization and other kinds of social-economic-technological progress. My 1 cent: I like it, as its analysis and solutions are consistent with what I (an economic historian) know about economic history. Eating localy produced organic fruit is not the solution. Eating less, efficiently produced, meat is (mind however that even ‘organic’ chicken, like label rouge, is much more sustainable than whatever kind of ‘efficiently’ produced beef). Here, a competing alarmist manifesto by seventeen scientists, which, to my liking, contains way too much ‘we should’ (i.e: you should) thinking. The ecomodernist manifesto: Read more…
Today, Eurostat published the 2014 regional unemployment data.
A) Very large regional differences in Belgium and Italy (in Spain too, but the lowest rate in Spain is thus high that this is less interesting)
B) These differences used to be very large in Germany, too, but not anymore. Some East German regions even have lower unemployment than some West German regions. But on average, unemployment in East-Germany is still very high (about 10%). I didn’t check 2014 but until 2014 the larger part of the decline of unemployment in East Germany was caused by out-migration, not by job growth.
C) Look at Poland and the remarkable developments in the former German territories.
D) Including France and Slovenia there are 13 countries (13!) with average unemployment of about 10% or higher… Let’s write down those debts (starting with a trillion, or so), or issue helicopter money which people can use to pay these debts and start working again, instead of pushing ideological agenda’s. Yes, part of my pension is invested in these debts. But a prosperous Europe is, as far as I’m concerned, a much better pension guarantee than unsustainable debt levels. Read more…
Annotated links and updates. Flawed (neoclassical) models and flawed (neoclassical) metrics edition.
1) The lack of empirical discipline of ‘micro-founded’ models. Simon Wren-Lewis has an interesting post about the difficulty of reconciling ‘micro founded’ models with data on consumption. But the problem runs a lot deeper than Wren-Lewis thinks. ‘Micro founded’ does not mean ‘founded upon micro relations and data’ but ‘applying the outdated and refuted neoclassical model of the consumer to an entire country, as if this country was an individual being’. Indeed, pretty weird, but when you do this, you have to be consistent and coherent and change your micro definition of consumption. On the (real) micro level, individual consumption (defined as purchases) can be explained by income, availability of credit, consumer confidence (which we do measure) and wealth of a household or individual. Read more…
from Dean Baker
In the week since Secretary Clinton announced she is entering the presidential race, there have been numerous stories asking about the agenda she will adopt in her campaign. In her announcement video, she indicated she wanted to be a champion for the average worker against the wealthy.
While many policies will be needed to improve the situation of the poor and middle class, there are three simple ones that could make a big difference: a more competitive dollar, a Federal Reserve Board committed to full employment, and a financial transactions tax to rein in Wall Street. If Clinton or any other presidential candidate wants to level the playing field, these policies would be a great place to start. Read more…
from David Ruccio
All books $10
On the use and misuse of theories and models in economics
Lars Pålsson Syll
Bubble Economics: Australian Land Speculation 1830 – 2013
Paul D. Egan and Philip Soos
Essays Against Growthism
Green Capitalism: The God that Failed
Feudalism, Fascism, Libertarianism and Economics
Forthcoming Read more…
Ben Bernanke: The revolving door between Wall Street and U.S. government agencies continues to revolve.
from David Ruccio
Apparently, the door between Wall Street and the U.S. government agencies in charge of regulating Wall Street continues to revolve. Former Federal Reserve chair Ben Bernanke is the latest to walk through the door. Read more…
from Lars Syll
In its standard form, a significance test is not the kind of “severe test” that we are looking for in our search for being able to confirm or disconfirm empirical scientific hypothesis. This is problematic for many reasons, one being that there is a strong tendency to accept the null hypothesis since they can’t be rejected at the standard 5% significance level. In their standard form, significance tests bias against new hypotheses by making it hard to disconfirm the null hypothesis. Read more…
Schauble, the German finance minister, did it again. In the New York Times: distorting the facts using a mixture of ignorance and misunderstanding to push an ideological agenda. The finance minister of Germany is clearly is not only the man who kicks the can down the Autobahn by postponing badly needed government investments. To be more precise: who kicks this can towards the banks by (1) postponing investments (2) demonizing any kind of government deficit and (3) at a time when the German state has to pay 0% interest rate, tries to outsource financing of the badly needed maintenance investments to a private/public corporation which has to pay much higher interest rates than the state, did not know his facts. Pub quiz question: which party (the government or the banks) will, according to the present plans, bear the risk of these investments…
Schauble also is – and will be remembered as – the man who wrote inconsistent and wrong, not fact checked nonsense in the New York Times. This newspaper is famous for its fact checking but this opinion piece by a foreign finance minister seems to have slipped through.
* Inconsistent as he states that he despises debt financed spending. But at the same time he accepts that German banks and companies lend tens and even hundreds of billions of euro to counterparts in other countries – to quite an extent to finance spending. The housing bubbles in Spain and Ireland really were related to the German (and Dutch) current account surplus, the Euro and financial integration and all that!
Source: Eurostat, national account series.
* Wrong, Read more…
from David Ruccio
The Wall Street Journal notes that workers wages in the United States are lower today than they were back in 1972.
In particular, both average real weekly earnings and real hourly earnings of production and nonsupervisory workers peaked in October 1972 (“when Richard Nixon won re-election, Eugene Cernan became the last man to walk on the moon and the Dow Jones Industrial Average closed above 1,000 for the first time”) and they still haven’t reached that level more than four decades later. Read more…
Look here for part 1 of this series, about money. Today: market fundamentalism. The posts are supposed to be succinct, to look at the issues from the angle of the economic statistician.
Today: market fundamentalism.
There are, in my view, three main strands of market fundamentalism in DSGE-macro models:
1) The idea that market prices are ‘optimal’, especially when we’re in equilibrium (whatever that is)
2) The idea that non market production, especially government production like lots of education or health care, is essentially worthless
3) The idea that markets are not just very dynamic and creative (which surprisingly does not seem to be very interesting to the DSGE economists) but that a market system leads to some kind of optimal general equilibrium or (taking the models at face value) is at least not totally inconsistent with such a situation. Read more…
from Lars Syll
Abstraction is the most valuable ladder of any science. In the social sciences, as Marx forcefully argued, it is all the more indispensable since there ‘the force of abstraction’ must compensate for the impossibility of using microscopes or chemical reactions. However, the task of science is not to climb up the easiest ladder and remain there forever distilling and redistilling the same pure stuff. Standard economics, by opposing any suggestions that the economic process may consist of something more than a jigsaw puzzle with all its elements given, has identified itself with dogmatism. And this is a privilegium odiosum that has dwarfed the understanding of the economic process wherever it has been exercised.
Bringing economics back into liberal academic life.April 16, 2015.http://www.ft.com/cms/s/0/99799262-e293-11e4-ba33-00144feab7de.html#ixzz3XTazf200
Sir, The moribund orthodoxy that currently exercises such an inflexible grip on university economics departments will, as Wolfgang Münchau comments, inevitably face a challenge, and this “will come from outside the discipline and will be brutal” (“Macroeconomists need new tools to challenge consensus”, April 13). The orthodoxy has brought this dismal prospect on itself through the brutality with which it has purged those departments of any other school of thought than its own.
Indeed, in its extreme version, the orthodoxy’s doctrine holds quite simply that there are “no schools of thought in economics”, a totalitarian assertion all too true in most economics departments today, so ruthless has been the purge of alternatives. As a result, the different approaches to economic issues of Adam Smith, Bentham, Ricardo, Marshall, Keynes, Friedman and so on are all relegated to the fringe subject of the “history of economic thought”.
from Dean Baker
The Labor Department reported the U.S. economy created 126,000 jobs in March. This was a sharp slowdown from the 290,000 average over the prior three months. This relatively weak jobs report led many economic analysts to comment that the economy may not be as strong as they had believed.
This reassessment is welcome, but it really raises the question of why so many professional economists and economic reporters could be so badly mistaken about the strength of the economy. There never was much basis for claiming a boom in the U.S. economy and the people claiming otherwise were relying on a very selective reading of the data.
Just starting with the most basic measure, real GDP in the United States grew at just a 2.2 percent annual rate in the fourth quarter of 2014. This is a pace roughly in line with most estimates of the economy’s potential rate of growth. This means that the economy was just keeping up with the growth in its potential, filling none of the large gap between potential GDP and actual GDP that still persists from the 2008–2009 recession. Read more…
from Lars Syll
In their new book, Mastering ‘Metrics: The Path from Cause to Effect, Joshua D. Angrist and Jörn-Steffen Pischke write:
Our first line of attack on the causality problem is a randomized experiment, often called a randomized trial. In a randomized trial, researchers change the causal variables of interest … for a group selected using something like a coin toss. By changing circumstances randomly, we make it highly likely that the variable of interest is unrelated to the many other factors determining the outcomes we want to study. Random assignment isn’t the same as holding everything else fixed, but it has the same effect. Random manipulation makes other things equal hold on average across the groups that did and did not experience manipulation. As we explain … ‘on average’ is usually good enough.
Angrist and Pischke may “dream of the trials we’d like to do” and consider “the notion of an ideal experiment” something that “disciplines our approach to econometric research,” but to maintain that ‘on average’ is “usually good enough” is an allegation that in my view is rather unwarranted, and for many reasons.
First of all it amounts to nothing but hand waving to simpliciter assume, without argumentation, that it is tenable to treat social agents and relations as homogeneous and interchangeable entities. Read more…
from David Ruccio
Labros Skartsis has written a labour of love: “Greek vehicle & machine manufacturers 1800 to present. A Pictorial history“. One would maybe expect a rather thin book – but it isn’t. Skartsis wrote voluminous “tribute to a large number of engineers, designers and entrepreneurs whose efforts could soon be completely forgotten”. The tone of the volume is, understandably, somewhat desperate. Since 1981, when Greece entered the European Union, the history of Greek manufacturing is mainly a history of decline. Despite this, the book shows that Greece does have an engineering and designing tradition, even though the Greek themselves seem to be pretty indifferent about this. And even when manufacturing in Greece is finally, after almost seven years of fast decline, rebounding at least a little (graph).
Skartsis poses the question why Greece isn’t more of a manufacturing powerhouse, despite the significant tradition. According to him this is not caused by a high wage level but by lack of a manufacturing culture and manufacturing oriented policies. His introduction: Read more…
Lars Pålsson Syll
A wonderful set of clearly written and highly informative essays by a scholar who is knowledgeable, critical and sharp enough to see how things really are in the discipline, and honest and brave enough to say how things are. A must read especially for those truly concerned and/or puzzled about the state of modern economics.
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 Review. Read more…