. Public debt is normally nothing to fear, especially if it is financed within the country itself (but even foreign loans can be beneficent for the economy if invested in the right way). Some members of society hold bonds and earn interest on them, while others pay taxes that ultimately pay the interest on the […]
economics
The purported strength of New Classical macroeconomics is that it has firm anchorage in preference-based microeconomics, and especially the decisions taken by inter-temporal utility maximising ‘forward-looking’ individuals. To some of us, however, this has come at too high a price. The almost quasi-religious insistence that macroeconomics has to have microfoundations — without ever presenting any […]
Today’s headline news chronicles our triumphant, record-breaking petroleum exports: 6.4 million barrels a day. The highest weekly figure ever recorded. On the surface, it appears America may just make up in exports what the closure of the Straits of Hormuz prevents. On the surface. The reality of our domestic petroleum situation is more dire. The […]
For more than 20 years, economists were enthralled by so-called “rational expectations” models … That such models prevailed bears testimony to a triumph of ideology over science … Good science recognises its limitations, but the prophets of rational expectations have usually shown no such modesty. Joseph Stiglitz The rational expectations hypothesis presupposes — basically for […]
Most mainstream economists seek to explain social phenomena, structures, and patterns on the basis of the assumption that agents act in an optimising — i.e. rational — manner to satisfy given, stable, and well-defined goals. The procedure is analytical: the whole is broken down into its constituent parts in order to explain (or reduce) aggregate […]
Robert Skidelsky joined the University of Warwick in 1978 as Professor of International Studies, and in 1990 he was appointed Professor of Political Economy in the Department of Economics where he worked until his retirement in 2006 after 28 years of teaching and research at Warwick. He was made a member of the House of […]
The recurring pattern in financial crises is broadly the same. For one reason or another, a shift occurs in the economic cycle — such as war, innovation, or new regulation — which alters profit opportunities for banks and firms. Demand and prices rise, drawing ever larger parts of the economy into a state of euphoria. […]
Adam Smith, like the other Scottish Enlightenment philosophers, was strongly influenced by natural rights philosophy. Locke — under the influence of Hugo Grotius and Samuel von Pufendorf — had emphasised people’s natural freedom and right against the state. For Smith, natural freedom meant, among other things, that the individual himself should have the right to […]
One of the limitations of economics is the restricted possibility of performing experiments, forcing it to rely mainly on observational studies for knowledge of real-world economies. But still — the idea of performing laboratory experiments holds a firm grip on our wish to discover (causal) relationships between economic ‘variables’. If only we could isolate and […]
Economics today has — as we all know — become a ‘the model is the message’ discipline. However, as long as it does not seriously examine and evaluate the compatibility between the models and their real‑world target systems, the belief that these models significantly improve our ability to understand or explain what happens in our […]