Massimo Cingolani: Identifying Weaknesses in the Eurozone

The great achievement of the EU has been to reduce the probability of violent nationalist conflict among some of its members to a vanishing small probability while improving the economic lot of its members.  But in spite of the salesmanship surrounding the adoption of the single currency zone, much of this reduction in the propensity toward violence and economic growth took place before the adoption of the euro. It may be time to consider the notion that giving up the euro is a wiser alternative in the long run, unless someone can synthesize some kind of federal option, which hardly seems likely in the current political context. Read more

A sparsity based model of bounded rationality

The basic microeconomics textbook teaches that, when making a decision, people “maximize.” That is, they do the best they can in a very rational way.

Of course, this is at best a crude rendition of what real people do. Instead, people “sparsely maximize” and pay less or no attention to some features of the problem, such as prices. Read more

Joseph Stiglitz: Economics Has to Come to Terms with Wealth and Income Inequality

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Cited in Wikipedia entry “Tendency of the rate of profit to fall

Nobel laureate Joseph Stiglitz has been writing about America’s economically divided society since the 1960s. His recent book, The Price of Inequality, argues that this division is holding the country back, a topic he has also explored in research supported by the Institute.  On December 4th, he chaired the eighth Institute for New Economic Thinking Seminar Series at Columbia University, in which he presented a paper, "New Theoretical Perspectives on the Distribution of Income and Wealth Among Individuals.” In the interview that follows, Stiglitz explores the themes of this paper, the work of Thomas Piketty, and the need for the field of economics to come to terms with the growing gulf between haves and have-nots. Read more

Steve Fazzari & Barry Cynamon: What Happened to the "Feel Good" Economy?

One of the conundrums in regard to the recent US midterm elections is the apparent disconnect between the improvement in the unemployment rate—which has dropped below 6 percent—and the fact that so many Americans continue to feel so disillusioned about the economy.  In reality, this election was not about the unemployment rate per se or what any economist says about how the economy is doing. Rather, it was about how Americans feel the economy is doing. The fact is that most Americans do not believe the economy is doing better. Specifically, they do not think their personal economy has yet recovered.
 

From Reflexivity to the Wu-Tang Clan

Mathematics as a Common Language

A recurrent criticism made about the economics profession is that it has become overly mathematicised, to the extent of allowing “elegant” models crowd out reality. So the advocacy of mathematics as a common language for the economics profession undoubtedly fills many with horror. Read more

Inequality Hurts Economic Growth, for All of Us

It’s official, at least according to the OECD.

Rising inequality is estimated to have knocked more than 10 percentage points off growth in Mexico, New Zealand, Sweden, Finland and Norway over the past two decades. In Italy, the United Kingdom and the United States, the cumulative growth rate would have been six to nine percentage points higher had income disparities not widened. On the other hand, greater equality helped increase GDP per capita in Spain, France and Ireland prior to the crisis. Read more

William Lazonick: How Superstar Companies Like Apple Are Killing America’s High-Tech Future

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Few would argue that America’s fortunes rise and fall on its ability to generate technological innovations — to put bold ideas to work and then bring them to market. William Lazonick, professor of economics at the University of Massachusetts Lowell, and Matt Hopkins, research associate at the Academic-Industry Research Network, have investigated how the technology knowledge base gets created, what has gone wrong in America’s approach to innovation, and why the truth about who invests in the process is poorly understood. In the interview that follows, Lazonick shares findings from two recent papers that are part of the Institute for New Economic Thinking’s project on the “Political Economy of Distribution.” He explains why successful companies like Apple need to make fundamental changes to the way they allocate resources and stop throwing away America’s most valuable asset for future innovation — you. Read more

Peter Temin: Lessons from the Great Depression

George Santayana once wrote that those who could not remember the past were condemned to repeat it.  And looking at today’s policy makers at work seeking to combat the huge challenge of unemployment in the aftermath of the Great Financial Crisis of 2008, it appears that there is a lot of collective amnesia evident amongst this crowd.