I. Introduction In my previous blog entry, the normal form game and Nash equilibrium were introduced. Attention was restricted to pure strategies. As will be illustrated below, not every finite, normal form game has a pure strategies Nash equilibrium. The notion of mixed strategies extends the notion of pure strategies, allowing players to assign probabilities … More Game Theory: Mixed-Strategies and Zero-Sum Games
“Are you traveling together?” the ticket agent asked. “Yes,” you responded. “So how’s row 15 — aisle and center or center and window?” the agent inquired. “No, we’d like row 7, aisle and window,” you replied. The agent gave you a strange look, but decided not to question your motives and accommodated your request. What were your motives? You were banking on having extra room during … More Game Theory: The Game Of Life
New evidence suggests that the global economic slow down may have been present before the great recession of 2008. … More Conference: Making Sense of the Productivity Slowdown, Panel 1
uring the presidential debates, the following question was asked in more than one way to the candidates: “So what do you think is the biggest threat to US security”? The answer given by all candidates from both parties are quite scary! … More 2015 Presidential Debates: What is the Biggest Threat to US Security?
Net employment has been increasing at a brisk pace in the UK and, since the third quarter of 2013, in Spain. Eurostat (kudo’s) has new data about this: labour market flows. This statistic shows how many employed people became unemployed, how many unemployed people became employed, how many ‘inactive’ people became ‘active'(i.e. became employed or started looking for a job) and how many ‘active’ people became ‘inactive’.
… More Labour market flows and the musical chairs economy
Liquid Modernity Liquid-modernity-maggie-nichols.jpg Definition Liquid Modernity is sociologist Zygmunt Bauman’s term for the present condition of the world as contrasted with the “solid” modernity that preceded it. According to Bauman, the passage from “solid” to “liquid” modernity created a new and unprecedented setting for individual life pursuits, confronting individuals with a series of challenges never … More Liquid Modernity – Cyborg Anthropology
“It’s not really a Nobel, and economics isn’t really a science.” October 13, 2015 Editor Leave a comment Go to comments from the Christian Science Monitor Is economics a science? … More “It’s not really a Nobel, and economics isn’t really a science.” | Real-World Economics Review Blog
Real world economists and the economics curriculum Keynes’ attempt to re-shape the world order in the 1940s highlighted the need of an international currency system that might only work by means of a “wide measure of agreement”, that is, by means of the creation of a new international convention. In Keynes’ time, this convention would rely on multiple needs: an international currency, a stable exchange rate system, redistribution of international reserves, stabilizing mechanisms, sources of liquidity, besides a central institution to aid and support other international institutions related to the planning and regulation of the world economic life. In our times, new convention-conducing institutions could foster financial regulation. As global finance has subordinated the outcomes of social reproduction, the main question is, as Hyman Minsky warned, Who will benefit? … More Real world economists and the economics curriculum
If you say “All models are wrong” then the most important issue is to define the words. “All” is quite clear, “are” also is without much doubt. So, we are left with “models” and “wrong” … The more interesting discussion is the one about the definition of truth. The philosopher Bertrand Russell has written something on truth about a century ago in his book The Problems of Philosophy (ch. XII): “It will be seen that minds do not create truth or falsehood. … More Are all models wrong?
This chart illustrates the share of corporate income received by workers (in the form of wages and benefits) from January 1979 through April 2015. As the Economic Policy Institute explains, Typically, the labor share rises during recessions because profits fall much faster than wages during downturns … More Share of corporate income received by US workers from 1979 to 2015.
s is well-known, New Classical Economists have never accepted Keynes’s distinction between voluntary and involuntary unemployment. According to New Classical übereconomist Robert Lucas, an unemployed worker can always instantaneously find some job. No matter how miserable the work options are … More The ‘bad luck’ theory of unemployment
The essence of this critique of the market lies in insisting on the structural relations that hold among individuals. The classic conception of the market sees individuals atomistically and therefore maintains that an individual’s holding can be justified by looking only at that individual. This was the original appeal of the libertarian picture: that the validity of an agreement could be established by establishing A’s willingness, B’s willingness, and the fact that they are entitled to trade what they are trading. Justification could be carried out purely locally. But this is not the case … More Inequality and the poverty of atomistic reductionism
Employment Rate According to Eurostat, “The employment rate of older people has increased in both in the long term since 2002 and in the short term since 2009. The positive trend has been consistent for both men and women over the entire time period. Because the employment rate for older women has grown faster than for older men, the gap between men and women has narrowed slightly“. Which means that at least part of the dreaded ‘dependency’ crisis has been solved: less 55 to 64 year olds are dependent, more have a job (which means that the denominator of the dependency ratio also increased). … More Graph of the day. Employment of ‘older’ people in the EU
One thing my 28 years as a card-carrying economist have taught me is that conventional economic theory is the best guide to what is likely to happen in the economy. Read whatever it advises or predicts, and then advise or expect the opposite. You (almost) can’t go wrong. Nowhere is this more obvious than in … More Why China had to crash: Part 2 | Real-World Economics Review Blog
The way it works is that it visualizes the entire world’s economic output as a circle. That circle is then subdivided into a bunch of blobs representing the economy of each major country. And then each country-blob is sliced into three chunks — one for manufacturing, one for services, and one for agriculture. Check it out: You can see some cool things here. … More A striking diagram of the world economy – Vox
ast year, President Obama called for increasing the federal minimum wage to $10.10 an hour by the end of 2015. He argued that after 2015, increases in the minimum wage should be tied to inflation, with the minimum wage rising in line with the consumer price index.
The purchasing power of the minimum wage peaked in the late 1960s at $9.54 an hour in 2014 dollars. That is over two dollars above the current level of $7.25 an hour. While raising the minimum wage to $9.54 would provide a large improvement in living standards for millions of workers who are currently paid at or near the minimum wage, it is worth asking a slightly different question: what if the minimum wage had kept in step with productivity growth over the last 44 years? In other words, rather than just keeping purchasing power constant at the 1968 level, suppose that our lowest paid workers shared evenly in the economic growth over the intervening years. … More An $18.42 Minimum Wage? (graph)
They try to explain business cycles solely as problems of information, such as asymmetries and imperfections in the information agents have. Those assumptions are just as arbitrary as the institutional rigidities and inertia they find objectionable in other theories of business fluctuations … I try to point out how incapable the new equilibrium business cycles … More Why Real Business Cycle models can’t be taken seriously
Just three days before he passed away, a notable Columbia University professor of economics William Vickrey was awarded 1996 Nobel Prize in Economic Sciences for fundamental contribution to the economic theory of incentives under asymmetric information. VickreyThroughout his prolific career, Vickrey developed methods of analyzing the problems of incomplete information and also specialized on welfare, … More Get free from the dogmas of the apostles of austerity: Fifteen Fatal Fallacies of Financial Fundamentalism
Some recent data from Eurostat: Quality of life. GDP (Gross Domestic Product) shows the accounting connection between monetary spending, production and income. But it’s only about monetary variables like debt and income. it’s not about happiness or environmental damage. Eurostat however has a new, easy multidimensional scoreboard to estimate aspects of ‘quality of life’ (health, … More Links. Recent Eurostat data. Beyond GDP, ‘Amenable and preventable death’, employment
Why Discards, Diverse Economies, and Degrowth? Since the last economic recession in the mid 2000s, there has been a surge in scholarly conversations around fundamentally changing how economies work and what they value. For example, Figure 1 charts the number of English-language articles using the keyword “degrowth,” one of the most radical positions to the … More Why Discards, Diverse Economies, and Degrowth? By Josh Lepawsky and Max Liboiron | Society and space
The collapse of the old system has already happened and efforts to perpetuate it are only aggravating the problem. People have experienced the reality of this shift in their everyday lives, in their vulnerability to systemic risk and sudden job losses. However governments have remained in denial, trying to apply the ‘one solution’ fits all problems model (i.e. trying to correct a private debt problem by creating more debt). Meanwhile… … More The Rise of the Liquid Society
Neoclassical economics nowadays usually assumes that agents that have to make choices under conditions of uncertainty behave according to Bayesian rules, axiomatized by Ramsey (1931) and Savage (1954) – that is, they maximize expected utility with respect to some subjective probability measure that is continually updated according to Bayes theorem. If not, they are supposed to be irrational, and ultimately – via some “Dutch book” or “money pump”argument – susceptible to being ruined by some clever “bookie”. … More The Keynes-Ramsey-Savage debate on probability
This lecture explains the close relationship between private debt and employment. It draws a picture of what is coming next and proposes a concrete solution to the current debt crisis. … More The true state of our economy and what to expect
Social media analysis reveals a growing trend towards a sense of shared responsibility. This should be a major concern for companies, because what happens when this paradigm makes the leap from humanitarian aid to consumer choice, is that socially responsible practices will become a requirement to stay in business and not an option. Smart brands will be wise to note this change in consumer attitudes, where new information is quickly translating into action. … More Consumer Choice and Growing Shared Responsibility
Originally posted on LARS P. SYLL:
? ? Back in 1992, New Jersey raised the minimum wage by 18 per cent while its neighbour state, Pennsylvania, left its minimum wage unchanged. Unemployment in New Jersey should — according to mainstream economic theory — have increased relative to Pennsylvania. However, when economists Alan Krueger and David Card…
Originally posted on Flip Chart Fairy Tales:
It now seems to have dawned on just about everyone that, if the government really does cut £12 billion from the social security budget, most of the pain will be felt by those in work. There have been some interesting reactions to this from right-of-centre think-tanks. The Institute of Economic…
Originally posted on LARS P. SYLL:
The classical theory of comparative advantage has driven US trade policy for the past fifty years. That policy, in combination with technical innovations that have lowered costs of transportation and communication, has opened the global economy. Yet paradoxically, this opening has rendered classical trade theory obsolete. That in turn…
Originally posted on Econ Off the Shelf:
From Finance Behind the Veil of Money, page 32: The opportunity-cost concept does not allow for the inclusion of time. Opportunity costs, in other words, are not a matter of action but of choice. James Buchanan is not the only one who stresses the close relationship between choice and opportunity…
Originally posted on LARS P. SYLL:
Could it be better to discard 90% of the reported research? Surprisingly, the answer is yes to this statistical paradox. This paper has shown how publication selection can greatly distort the research record and its conventional summary statistics. Using both Monte Carlo simulations and actual research examples, we show…
Originally posted on Flip Chart Fairy Tales:
How much of a problem is high public debt? The government claims it is a serious problem and we need to reduce it, urgently. Others maintain that it isn’t really much of an issue. We’ve had higher debt-to-GDP ratios in the past so what’s the problem? The reaction of some on the…