Real-World Economics Review Blog

from Lars Syll

Although Philippe Aghion’s work presents itself as a refined and progressive departure from crude neoliberalism, a closer examination reveals a framework that — despite its mathematical sophistication — ultimately reinforces and legitimises a conservative, pro-capitalist economic order. His professed ‘pragmatism’ often serves less as a neutral analytic stance than as an ideological device to preserve existing hierarchies of power.

Aghion’s celebrated concepts — such as ‘appropriate institutions’ and the inverted-U relationship between competition and innovation — cloak political choices in the language of empirical neutrality. In practice, they offer an enduring rationale for policy restraint, perpetually warning that the ‘optimal’ equilibrium has yet to be achieved. This intellectual caution translates into a defence of inaction: a convenient argument against bold redistribution or stronger market regulation. His reluctance toward taxing the wealthy epitomises this logic, invoking speculative fears about stifled innovation while minimising the well-documented harms of entrenched inequality and rentier dominance. Read more…

from John Komlos

. . . the common wisdom erroneously equates economic growth with rising living standards. However, survey after survey categorically contradicts this assumption: happiness and life satisfaction in the U.S., for instance, has stagnated and even declined relative to the welfare states of Western Europe, but especially compared to Scandinavia and Switzerland (Easterlin, 2004; Helliwell et al., 2024). The growth-at-any-price perspective disregards the decisive problems associated with 19 Economic Thought 12.1: 16-27, 2024 stress, pain, and the distribution of income: economic growth has not benefited the less skilled, those without a college education, or without some skills that are valued in the new knowledge economy (Komlos, 2019b).

Despite 250 years of extraordinary economic growth (and previously unimaginable scientific and technical achievements) since the Industrial Revolution, discontent is now more widespread in the U.S. than ever before with the exception of the years prior to the outbreak of the Civil War. It is amazing how much dissatisfaction a $29 trillion (dual) economy can evidently produce. In 2023 merely 52% of U.S. adults considered themselves ‘thriving’ while the rest were ‘struggling’ (43%) or ‘suffering (4.7%)’ (Gallup, 2022). In other words, the U.S. version of capitalism is amazingly inefficient at producing contentment for some 150 million of its citizens. 

In contrast, humanistic economics implies that a kinder and more just capitalism is possible, embedded in a truly democratic society that enables people to live their daily lives with less anxiety, conflict, inequality, insecurity, manipulation, pain, poverty, stress, uncertainty, unemployment, and less fear that their lives could spiral out of control during the next recession. This variant of capitalism would also maximize educational attainment, mental and physical health, intellectual satisfaction, leisure time, dignity, respect, healthy social relationships, and a moral life. Consequently, by disregarding the distribution of income and the stress generated by the economic system, free-market aficionados have led us astray.      read more   

from Peter Radford

Demos kratia

People power.

This is about economics and its role in undermining democracy.

Let’s begin with Martin Wolf.

He gives us, in this morning’s Financial Times, an excellent and succinct overview of Trump’s inevitable failure to deliver new manufacturing jobs.  He wheels out all sorts of technocratic, and thus highly sensible, arguments based on economic reasoning in order to prove his point.  Then, towards the end he shifts to politics.  Right wing populism, he suggests, is a consequence of the divergence in outcomes that less educated men and the technocratic overclass have experienced during this era of post-industrialization of the American economy.  Whereas employment in manufacturing was once an avenue upwards in status, now it is much diminished and a whole section of society is blocked from improvement.

So far so good.  There is nothing remarkable in this narrative.  It is well worn.

There are, however two very notable aspects I want to daw your attention to,

First, yes, the argument is well worn.  So why has nothing been done?  Why has an entire section of society been cut out of the aspiration that drives the American myth? This, surely, is an epic political failure.

Second, Read more…

from Dean Baker

Earlier this week The New York Times ran a big think piece by The New Atlantis editor Ari Schulman, on whether “science is broken,” and whether NIH director Jay Bhattacharya can fix it. Incredibly, the word “patents” did not appear once.

That is incredibly bizarre. The high prices for drugs and other innovations that patent monopolies allow companies to charge are the basis for most of the corruption we see in health science. This is the main reason that medical journals cannot trust the articles submitted accurately reflect research done by the authors.

The point is simple and straightforward. As a result of patent monopolies, there is an enormous amount of money at stake in biomedical research, unlike research in Astronomy or English Literature. While there are always instances of academics plagiarizing the work of others, or inaccurately representing sources and data, the problems in other fields are nowhere near as large as is the case with biomedical research.

The consequences for public health of the perverse incentives created by patent monopolies are very real. Being able to charge prices that are ten times, or even a hundred times, the free market price gives drug companies enormous incentive to misrepresent the safety and effectiveness of their drugs. We saw this most clearly with the opioid crisis, but the corruption issue arises all the time. Read more…

Chris Brunet (male, white), who advertises himself as an ´independent investigative journalist´, did an embarrassingly bad job investigating the number of publications of Lisa Cook (member of the board of the US central bank, female, black). The proverbial ´1 minute on the internet´ would have saved him the embarrassment. Based on distinctly incomplete data, he attempts, using Twitter, to tarnish Mrs. Cook’s reputation. He uses phrases like ´likely´ and states facts without providing evidence. Which an investigative journalist should, ´likely´, not do. Also, the fact that she´s an economic historian instead of an economist is, contrary to the insinuation of mr. Brunet, a plus.

The publications of mrs. Cook are listed here. While the documentation of mr. Brunet lists 7 publications, I counted 30. Mr. Brunet has to explain the difference or be silent. Aside: in my country (the Netherlands) and partly because economic historians often publish alone, they tend to have relatively few publications compared with other sciences. I did not check this for the USA. But mr. Brunet should. I did not read any of the publications, so I can´t say anything about the quality. However, what mr. Brunet should have done is not counting publications and using a flawed source, but reading them. That´s what it takes to be a genuine investigative journalist who is passionate about science. Quality matters. Once upon a time, a Nobel prize was awarded for a 2,5-pager (Watson and Crick, DNA (oops, authors should have been Francis Crick, Rosalind Franklin, James Watson and Maurice Wilkins)! When he has read them, we might continue this conversation.