We need citizen´s CBDCs (Central Bank Digital Currencies), ultimately controlled by parliaments and not by central banks.

December 12, 2025 6 comments

Summary: A Central Bank Digital Currency can aid citizens and companies. But national parliaments, not central banks, should have the final say about its design. Also, privacy and lowering costs, not combating the black and criminal economy and terrorism, are paramount for its success.

This is a bit of a note to myself, my ideas about this might change when I learn more.

Central Banks are developing CBDC´s: Central Bank Digital Currencies. This is a new kind of money, issued by a Central Bank. You can carry it on your mobile phone or on a card. You can pay in shops with your phone or your central bank card, even if the internet is down. The same applies if the electronic payment system is down and you want to order a book online.

Read more…

Wealth grows fastest among the richest

December 11, 2025 1 comment

from World Inequality Report

Figure 1.7. Wealth grows faster among the very wealthy

Trump gives the country an economics lesson on tariffs

December 11, 2025 Leave a comment

from Dean Baker

Trump first announced his massive tariffs on “Liberation Day,” which was April 2. This was supposed to be the beginning of the United States rebuilding its manufacturing capacity. Since Liberation Day, the economy has lost 60,000 manufacturing jobs, factory construction is down at least 5 percent, and inflation has risen to 3.0 percent. 

It is also clear that businesses and consumers here have paid Trump’s tariffs, not foreigners as Trump seems to believe. Import prices have risen since Liberation Day. These are the price of the goods we import before Trump imposes his tariffs. If exporters are eating the tariffs, then the import price index should have fallen considerably. The data show this is not true. Read more…

Conversations with heterodox economists

December 9, 2025 4 comments

from Lars Syll

Compare conversations in real-world economics: a collection of interviews by jamie morgan products from over 25,000 storesJamie Morgan: To a member of the public it must seem weird that it is possible to state, as you do, such fundamental criticism of an entire field of study. The perplexing issue from a third party point of view is how do we reconcile good intention (or at least legitimate sense of self as a scholar), and power and influence in the world with error, failure and falsity in some primary sense; given that the primary problem is methodological, the issues seem to extend in different ways from Milton Friedman to Robert Lucas Jr, from Paul Krugman to Joseph Stiglitz. Do such observations give you pause? My question (invitation) I suppose, is how does one reconcile (explain or account for) the direction of travel of mainstream economics: the degree of commonality identified in relation to its otherwise diverse parts, the glaring problems of that commonality — as identified and stated by you and many other critics?

Lars P. Syll: When politically “radical” economists like Krugman, Wren-Lewis or Stiglitz confront the critique of mainstream economics from people like me, they usually have the attitude that if the critique isn’t formulated in a well-specified mathematical model it isn’t worth taking seriously. To me that only shows that, despite all their radical rhetoric, these economists — just like Milton Friedman, Robert Lucas Jr or Greg Mankiw — are nothing but die-hard defenders of mainstream economics. The only economic analysis acceptable to these people is the one that takes place within the analytic-formalistic modelling strategy that makes up the core of mainstream economics. Models and theories that do not live up to the precepts of the mainstream methodological canon are considered “cheap talk”. If you do not follow this particular mathematical-deductive analytical formalism you’re not even considered to be doing economics …

The kind of “diversity” you asked me about, is perhaps even better to get a perspective on, by considering someone like Dani Rodrik, who a couple of years ago wrote a book on economics and its modelling strategies — Economics Rules (2015) — that attracted much attention among economists in the academic world. Just like Krugman and the other politically “radical” mainstream economists, Rodrik shares the view that there is nothing basically wrong with standard theory. As long as policymakers and economists stick to standard economic analysis everything is fine. Economics is just a method that makes us “think straight” and “reach correct answers”. Similar to Krugman, Rodrik likes to present himself as a kind of pluralist anti-establishment economics iconoclast, but when it really counts, he shows what he is – a mainstream economist fanatically defending the relevance of standard economic modelling strategies. In other words — no heterodoxy where it would really count. In my view, this isn’t pluralism. It’s a methodological reductionist strait-jacket.

Trump RX: The merger of pharma corruption and Trump crazy

December 3, 2025 Leave a comment

from Dean Baker

I haven’t given my diatribe on cheap drugs for a while, but what the hell. It’s a huge deal and no one in a position of power gives a damn (just like the housing bubble), but I’ll keep trying.

Just to remind everyone of where things stand, drugs are cheap. The government makes them expensive with patent monopolies and other forms of protection.

There are all sorts of self-imagined progressive types who see their goal in life as getting the government to rein in the market to end poverty and reduce inequality. In the case of prescription drugs, the problem is the government, not the market.

Drugs are almost invariably cheap to manufacture and distribute. They would sell for $10, $20, or $30 per prescription in a free market. The reason people end up paying tens or even hundreds of thousands of dollars for drugs they need for their health or life is because the government prevents competition that would bring prices down close to the drug’s cost.

We need to pay for the development of drugs, but we don’t need patent monopolies for that. We used to spend over $50 billion a year for biomedical research through the NIH and other government agencies. We would need to spend perhaps three times that amount to replace the research now supported through patent monopolies.

That additional $100 billion sounds like a lot of money, except we would likely save on the order of $550 billion a year on what we spend on drugs. We currently spend over $720 billion a year for drugs that would likely sell for around $150 billion in a free market. Read more…

Kenneth Boulding on economists and madmen

December 1, 2025 3 comments

from Lars Syll

TOP 25 QUOTES BY KENNETH E. BOULDING (of 126) | A-Z Quotes

Economics textbooks — scandalous intellectual dishonesty

November 25, 2025 9 comments

from Lars Syll

It is well-known that Keynes frequently criticised more traditional economics for committing the ‘fallacy of composition.’ This fallacy essentially involves the mistaken belief that the whole is nothing more than the sum of its parts. Keynes argued that this is not the case in society or the economy, and that, a fortiori, an adequate analysis of either cannot proceed by simply adding up the acts and decisions of individuals. The whole is greater than the sum of its parts.

This issue is evident when mainstream economics attempts to argue for the existence of ‘The Law of Demand’ on an aggregate level — the idea that when the price of a commodity falls, the demand for it will increase. While one might succeed in establishing this law for single individuals, it was firmly demonstrated by the Sonnenschein-Mantel-Debreu theorem as early as 1976 that it is impossible to extend ‘The Law of Demand’ to the market level, unless one makes wildly unrealistic assumptions, such as all individuals having homothetic preferences — which effectively implies that everyone has identical preferences.

This would only be conceivable if there were, in essence, only one actor — the (in)famous representative agent. So, yes, it was possible to generalise ‘The Law of Demand,’ provided we assumed that on the aggregate level there was only one commodity and one actor. What a generalisation! Does this sound reasonable? Of course not. It is utter nonsense. Read more…

Are the new national account guidelines any good? 7. Capital services.

November 24, 2025 3 comments

Summary: It´s meaningful to value fixed assets in the national accounts. As, however, not all transactions are capitalist market transactions and not all prices are capitalist market prices, the ´method of choice´ to value fixed assets proposed by the new national account guidelines, discounting expected future flows of income, is not as universal as suggested. Instead of one method, an amalgam of methods should be used, tailored to the specific ways fixed assets are used.

Read more…

Weaponizing 21st century money

November 23, 2025 1 comment

from Jamie Morgan

According to the Bank for International Settlements:

Society has a choice. The monetary system can transform into a next-generation system built on tried and tested foundations of trust and technologically superior, programmable infrastructures. Or society can re-learn the historical lessons about the limitations of unsound money, with real societal costs, by taking a detour involving private digital currencies that fail the triple test of singleness, elasticity and integrity.

According to Reuters, in the first half of 2025 the Trump family made more than $800m from crypto assets, and the Trump administration seems intent on normalising cryptocurrency as an investment asset and encouraging the world to adopt stablecoin as the future of money. Stablecoin are digital tokens that can be stored in a digital wallet and used for payment on blockchains. Their defining characteristic is that the issuer promises they will be redeemed for an equivalent sum of whatever the token was originally issued in exchange for. This is usually the US$, and there are more than $275bn in issued stablecoins. The issuer uses the $s it is paid to buy $ denominated securities, and it is these that stand behind the promise. However, on any given day, there is no guarantee that the different varieties of $ stablecoin will all have the same value across the many platforms they are available on. Moreover, if there is a sudden increase in people redeeming their stablecoin, then the issuer may be forced to rapidly sell assets held in their “reserve” – in worst cases this is a “firesale”, equivalent to a run on a bank. The more stablecoin there are, the more impactful this effect becomes and a “systemic stablecoin” would be big enough that its selling activity might drive down securities prices. The obvious implication is that securities would be sold for less than they were bought for. Not only would this affect the ability of the stablecoin issuer to fulfil its promise, but also the pricing effect would knock-on to any other user of and trader in securities. In the modern world of collateralisations and repos, this is the territory of margin calls and financial crises… The Achilles heel of a financialized system. Read more…

weekend read – Affordability in a Fading Gilded Age?

November 15, 2025 2 comments

from Peter Radford

Demos Kratia 13:

All of a sudden affordability is on every politician’s lips.  Somewhat regretfully in many cases.  Yet it is not a new issue — it has been brewing for ages.  Now it has burst on the scene, and only people branded as “extreme” seem willing to engage with it.

That’s one narrative for our moment.

Another is transition.  From what to what?  From the defunct neoliberal era that fizzled spectacularly in the bonfires of the Great Recession to the uncertainties of a world lived within the confines of artificial intelligence?  Was it vanities as Wolfe suggested in his defining description of that time?  Is it a rejection of the accumulation of luxuries in too few hands — a sort of modernized version of the original Savonarola uprising?  Or is it something different but more fundamental: an immolation of ideas no longer relevant?  If the latter, where do we go now for our ideas?  Deeper into our machines?  Certainly not to our leadership that seems now more a library of the past than creator of the future.

Look at it this way:

Read more…

A model is only as good as the assumptions it builds on

November 14, 2025 13 comments

Lars Syll

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 — most important of these are additivity and linearity. Important, simply because if they are not true, your model is invalid and descriptively incorrect. It’s like calling your house a bicycle. No matter how you try, it won’t move you an inch. When the model is wrong — well, then it’s wrong.

So, econometrics fails miserably, over and over again, but not only because of the additivity and linearity assumption.

Another reason for its failure is that the error term in regression models is thought to represent the effect of variables omitted from the models. The error term is sometimes considered a ‘cover-all’ term that accounts for the omitted content in the model, and is seen as necessary to preserve the assumed deterministic relationship between the other random variables included. Error terms are typically assumed to be orthogonal (uncorrelated) to the explanatory variables. But since they are unobservable, they are impossible to empirically test. Without justification of the orthogonality assumption, there is, as a rule, nothing to ensure identifiability. Read more…

The economic consequences of mr. Schauble

November 14, 2025 3 comments

I´m preparing a post about ´capital´ in the new national account guidelines. Part of this consists of updating my time series on fixed investments (spending on new roads, houses, machinery, R&D, brand building, weaponry, and the like).

According to my time series, in pre-modern economies, fixed investments are roughly 10% of GDP. During the process of modernization, they go up. In countries like the Asian Tigers and African Lions like Ethiopia and Nigeria, they can, for a prolonged period, even go up to 30 and 35%. In more mature economies, fixed investment typically accounts for between 18% and 25% of total GDP spending. During economic crises, especially those of the financial kind, they can drop to, in extreme cases, 15% of total spending. Normally. But Greece set a new record.

Interestingly, Türkiye did not witness a comparable fall after the Great Financial Crisis.

Interestingly, none of the other Balkan countries, which also suffer and suffered and suffer from extreme unemployment and political instability, has a rate which is even remotely as low as the Greek level.

Interestingly, neither Italy nor Spain nor Portugal witnessed a decline as steep, deep, and prolonged as Greece.

Greece still has to leave the Euro.

Solutions to the climate crisis cannot be achieved by action on the supply side

November 11, 2025 Leave a comment

from Ted Trainer and RWER issue 111

And then there is the climate crisis. There is now no possibility of limiting temperature rise to 1.5 degrees. The rate of transition to renewable energy sources is a small proportion of what would be required, and there is a strong case that renewables cannot sustain energy-intensive societies. (See below.) Emissions continue to rise and the present global trajectory is to a rise of over 3 degrees. Global energy supply seems to be peaking while the energy cost of supplying it continues to rise. Again these factors show that gross overshoot is evident and the answer must be reduction in demand.

Finally, rich world affluence is built on large scale exploitative resource extraction from poor countries, estimated by Hickle to be worth a net annual flow of $2.5 trillion (2021), not including the environmental damage and low wages and social disruption left in poor countries. The global capitalist economy inevitably generates this outcome. Again, the situation cannot be remedied without vast degrowth in rich countries.

Too few realise the magnitude of the sustainability and injustice predicament set by these figures. The argument below is that solutions cannot be achieved by action on the supply side; that is by attempting to find more resources or reduce impact to meet existing demand within the existing system. The overshoot is far too great now. Sustainability can only be achieved by enormous and radical transition to a very different social form, primarily defined in terms of simplicity.

Read more…

Schumpeterian growth theory and history

November 10, 2025 Leave a comment

from Lars Syll

Shiva, Schumpeter, and the Nobel: Understanding creative destruction | Economy & Policy Analysis - Business StandardThe so-called Nobel Prize in Economics (technically, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel). This year’s award went to Philippe Aghion, Peter Howitt, and Joel Mokyr for their contributions to what’s broadly called “Schumpeterian growth theory” — work that connects innovation and technological change to economic growth …

Aghion and Howitt’s models attempt to explain long-term growth by endogenizing productivity — the famous Solow residual. They borrow Schumpeter’s language of innovation and creative destruction, though often in a far more formal framework. In that sense, the connection to Schumpeter is more symbolic than substantive. Still, compared to some recent laureates, this year’s selection is a relatively defensible choice. Their models are certainly more in line with Schumpeter that some of the heterodox neo-Schumpeterian models.  Read more…

Are the new national accounts guidelines any good? 6. Labour.

November 10, 2025 2 comments

This blog is part of a series that discusses the new guidelines for the national accounts. Look also here (introduction), here (national accounts are political accounts), here (valuing resource depletion), here (households) and here (the (not so) informal economy).

Labour statistics are one of the key macroeconomic data sets. They are also part of the national accounts. Jobs, hours worked, employment, some volunteer labour, self-employment, and, partly, labour used for own production (like building your own house) are all covered. One can bicker over which kinds of volunteer work should be included and which not. A doctor working for naught in an organized way in a disaster area is included. An economist doing the same – probably not. But the line has to be drawn somewhere. As such, the chapter on labour is clear and consistent. Also, the reasons given to estimate hours and jobs and where to draw the lines are valid.

But I do have two problems.

Read more…

Economics vaguely but wrongly follows ideas of 18th century equilibrium particle mechanics

November 9, 2025 Leave a comment

from  Helmut Nechansky

Economists claim that economic theory would follow the model of the natural sciences. Yet, there are many facts which contradict this belief. Most importantly, the natural sciences show a strict hierarchy of explanations, where the properties of lower-level elements explain the emergent properties of higher-level aggregates. E.g. the properties of atoms explain the properties of molecules, which explain the properties of materials or the biochemical base of life, which in turn explain technical structures or biological species.

Anything like that is missing in the social sciences and particularly in economics: Humans and their properties do not form the base of the theory of households and firms, firms do not show in the theory of markets, and even microeconomics and macroeconomics do not add up. According to the standards of the natural sciences such unrelated constructs could be called at best a bunch of working hypotheses, but not even a theory, and even less science.

Read more…

new issue of Real-World Economics Review

November 6, 2025 Leave a comment

real-world economics review
issue no. 111

download whole issue

“Stock” and “throughput” in Herman Daly’s steady-state economy
in the light of an unpublished paper    3
Giandomenico Scarpelli

Addressing the climate and inequality crises    8
Jorge Buzaglo and Leo Buzaglo Olofsgård

Distributive consequences of neoliberalism in Russia    27
Ahmad Seyf

The effects of markets on society:
What happens to a society when it is exposed to a price system?    37
Tim van‘t Loo

Towards a just economy with video clips    50
Junaid B. Jahangir

Who’s eating the pudding?
Economic principles in business administration    59
Bernard C. Beaudreau

Review of Industrial policy for the United States
by Marc Fasteau and Ian Fletcher    67
Jamie Morgan

The fundamental error of the ‘science’ of economics:
equilibrium particle mechanics, instead of actor cybernetics    75
Helmut Nechansky

The crises of economic policy formation in Africa    108
Lloyd G. Adu Amoah

Degrowth: Implications for the Left    22
Ted Trainer

Why the rich don’t pay taxes

October 28, 2025 Leave a comment

from Lars Syll

Beneath the civic ideal of taxation as a collective, equitable endeavour lies an entrenched hypocrisy: the architecture of modern tax codes serves not the public good but the consolidation of private wealth. The progressivity of income tax is hollowed out at the uppermost tiers, where income is largely derived from capital — taxed at preferential rates that reward ownership over labour. This inequity is compounded by the affluent’s access to lawyers and financial advisers. For the wage-earning majority, such privileges are unattainable. The system is rigged in a vicious cycle: wealth buys power, power writes the rules, and the rules protect the wealth. The result is a regressive system that shifts the tax burden onto ordinary citizens, starving public services and undermining the foundations of democracy.

The rhetoric of progressive taxation conceals a fundamental contradiction. While nominally designed to impose higher contributions on higher incomes, tax systems in practice privilege the composition of wealth held by the rich. Read more…

Ben Bernanke — the “expert” who got it all wrong

October 25, 2025 2 comments

from Lars Syll

At Fed Chairman Bernanke's Press Conference, Stakes Are High | HuffPost ImpactBen Bernanke got the job as Federal Reserve Chairman because he marketed himself as the expert on The Great Depression. But he wasn’t the expert on The Great Depression itself: instead, he was an expert on explanations of The Great Depression that were consistent with mainstream economic theory.

The only explanation that was consistent with Neoclassical theory was that “the gov’mint did it!”, and that’s precisely what he asserted. In a cringeworthy speech that he gave at Milton Friedman’s 90th birthday party, Bernanke said:

“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again. (Bernanke 2002)“

Honestly, I could puke! Not only at how obsequious he was, but also because he was so damn wrong about what caused The Great Depression! Hyman Minsky got the cause right when he said that:

“the fundamental instability of a capitalist economy is upward. The tendency to transform doing well into a speculative investment boom is the basic instability in a capitalist economy. (Minsky, 1982, p. 66)“

And how much attention did Bernanke pay to Hyman Minsky? This is Bernanke’s entire consideration of Minsky in his book Essays on The Great Depression:

“Hyman Minsky and Charles Kindleberger have in several places argued for the inherent instability of the financial system, but in doing so have had to depart from the assumption of rational economic behaviour.

[A footnote adds] I do not deny the possible importance of irrationality in economic life; however, it seems that the best research strategy is to push the rationality postulate as far as it will go.“

We therefore had someone in control of the Federal Reserve at the time of the Global Financial Crisis, who claimed to be an expert on the Great Depression, but in reality, had no idea of why it happened.

Steve Keen

The AI bubble and counterfeit money

October 24, 2025 Leave a comment

from Dean Baker

I heard people who read the column I wrote last week on the AI bubble complain that, by rooting for its collapse, I was hoping for the failure of the US economy. Nothing could be further from the truth.

The logic of a run-up in asset prices being a bubble is that it is not grounded in reality; it is fake. The best analogy would be counterfeit money. Suppose some brilliant person devised a way to make up trillions of dollars of counterfeit money that we would all accept as real money, because we couldn’t tell the difference.

While the counterfeiter was working at their printing press, it might actually look like a good thing for the economy. After all, they and their friends would be buying all sorts of things with their counterfeit money. This would be driving demand in the economy and creating jobs. If someone exposed the counterfeiters, this demand and the jobs they create would disappear. 

This is all true, but a deeper look shows the darker side. First, they don’t just create demand, they also drive up prices. This can be seen very clearly with the AI bubble. Read more…