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July 31, 2017


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James Webber

That quote from Bob Rowthorn dates back to the days when he was a fervent Marxist. I wonder if he still thinks that!


But, but, but...bargaining power is central to search and matching models of the labor market: bargaining over the match surplus is what closes the model. The Beveridge curve is essentially a marked-up labor demand curve (when mapped into unemployment/wage space instead of unemployment/vacancies) , and the Nash-bargaining based wage determination curve a marked-up labor supply curve, with the markups depending on how the pie is divided between worker and firm (and markups are endogenous, since they depend on labor market tightness, thus on the labor variable itself). I suspect many labor search economists would not agree with you brushing aside the past thirty years of their discipline.


«The “dirty secret of economics,” he says, is “the central importance of power.”»

There is an excellent quote from a long time ago by Joan Robinson about the absence of power, and indeed the brazen assumption that there is no market power for anybody, in neoclassical Economics. Unfortunately I can no longer find it.

«Inflation, he says, is “society’s default method of reconciling, at least for a while, irreconcilable demands.”»

That is what S Johnson also wrote in his article in "The Atlantic" some years ago:

«Yet the economic solution is seldom very hard to work out. No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.
Typically, these countries are in a desperate economic situation for one simple reason — the powerful elites within them overreached in good times and took too many risks. [ ... ] They reckon — correctly, in most cases — that their political connections will allow them to push onto the government any substantial problems that arise. [ ... ] Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk — at least until the riots grow too large.»


«led us away from Adam Smith’s insights that people are social beings motivated by more than mere egotistic self-interest. [ ... ] wouldn’t have needed to rediscover the importance of institutions and complex motivations»

As to that I have always been astonished that the "rational economic actor" assumption is that they would maximize their personal welfare, because real people have children and have profound instincts as to maximizing their progeny too. But "rationbal economic actors" are supposed to be not just rational, but immortal too, and even "generational" models that some "brave" Economists have attempted to introduce don't account for the links between generations that genetics in reality creates.


«Neoclassical economists who tried to “construct economic laws that would validate the existing capitalist order as universal, natural, and harmonious”»

BTW that is exactly the opposite of how Economics works in practice: a theory in Economics must be validated by being able to prove the eternal and obvious truthiness of JB Clark's "three fables" (aka "capitalist order as universal, natural, and harmonious"), not viceversa.

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