The Holy Grail of Science
from Lars Syll
Traditionally, philosophers have focused mostly on the logical template of inference. The paradigm-case has been deductive inference, which is topic-neutral and context-insensitive. The study of deductive rules has engendered the search for the Holy Grail: syntactic and topic-neutral accounts of all prima facie reasonable inferential rules. The search has hoped to find rules that are transparent and algorithmic, and whose following will just be a matter of grasping their logical form. Part of the search for the Holy Grail has been to show that the so-called scientific method can be formalised in a topic-neutral way. We are all familiar with Carnap’s inductive logic, or Popper’s deductivism or the Bayesian account of scientific method.
There is no Holy Grail to be found. There are many reasons for this pessimistic conclusion. First, it is questionable that deductive rules are rules of inference. Second, deductive logic is about updating one’s belief corpus in a consistent manner and not about what one has reasons to believe simpliciter. Third, as Duhem was the first to note, the so-called scientific method is far from algorithmic and logically transparent. Fourth, all attempts to advance coherent and counterexample-free abstract accounts of scientific method have failed. All competing accounts seem to capture some facets of scientific method, but none can tell the full story. Fifth, though the new Dogma, Bayesianism, aims to offer a logical template (Bayes’s theorem plus conditionalisation on the evidence) that captures the essential features of non-deductive inference, it is betrayed by its topic-neutrality. It supplements deductive coherence with the logical demand for probabilistic coherence among one’s degrees of belief. But this extended sense of coherence is (almost) silent on what an agent must infer or believe.
In mainstream economics, there has long been an insistence on formalistic (mathematical) modelling, and to some economic methodologists this has forced economists to abandon realism and substitute axiomatics for real-world relevance. According to this critique, the deductivist orientation has been the principal reason behind the difficulty mainstream economics has had in understanding, explaining and predicting what occurs in modern economies. Yet it has also granted mainstream economics much of its discursive power—at least so long as no one begins asking difficult questions about the veracity of, and justification for, the assumptions upon which the deductivist foundation is erected.
The sort of formal-analytical and axiomatic-deductive mathematical modelling that constitutes the core of mainstream economics is difficult to reconcile with a real-world ontology. It is also why so many critics find mainstream economic analysis palpably and utterly unrealistic and irrelevant. Read more…
High and higher. US credit card rates.
Increasingly, we have to pay to pay. Directly, but also indirectly. For instance, credit card payments entail borrowing, and debts entail interest payments. It´s well known that interest rates on credit card debts are high (graph 1). At this moment, US rates even are at a historic high. They were roughly as high as US consumer loan rates. Today, they are 10% higher. Whenever the Fed decreases its interest rates, US credit card rates decrease by less than that decrease. And whenever the Fed increases its interest rates, US credit card rates increase more than this increase. In the Euro area, this is not the case with European credit card rates and European Central Bank rates. High US credit card delinquency rates are among the reasons cited for these high interest rates. But US delinquency rates halved (graph 2). My question: Why do people in the US still use US credit cards? Historically, US credit cards solved a US payment problem. Not anymore. I mean, why not use the modern Brazilian PIX payment system?
Graph 1. Selected US interest rates.
The 10 RWER Blog posts most read in 2025
1. Sweden’s unequal wealth distribution
Lars Syll, 2025
2. It wasn’t just flawed forecasts, dishonesty has also hurt economists
Dean Baker, 2025
3. Economics textbooks — scandalous intellectual dishonesty
Lars Syll, 2025
4. Donald Trump is badly confused: The story of supply and demand
Dean Baker, 2025
5. The Nobel family dissociates itself from the economics prize
Jorge Buzaglo, 2010
6. Reality — a virulent virus afflicting mainstream economics
Lars Syll, 2025
7. Leontief and the sorry state of economics
Lars Syll, 2025
8. The incredible cost of Bitcoin
Merijn Knibbe, 2025
9. USA: The Great Prosperity / The Great Regression: 5 charts
David Ruccio, 2011
10. If poor people knew how rich rich people are, there would be riots in the streets
David Ruccio, 2018
Rediscovering justice in economics
from Asad Zaman and WEA Pedagogy Blog
This post summarizes the first five chapters (through Chapter 5A) of Alasdair MacIntyre’s Whose Justice? Which Rationality? It is written for economists—especially heterodox economists—because MacIntyre exposes something deeper than “mainstream mistakes.” He shows why modernity has lost the ability to even hear what Plato and Aristotle were saying about justice: justice is not an individual preference or a procedural device, but a social achievement—an expression of shared norms, practices, and moral education.
Economists already know that methodological individualism shapes micro theory. Many also know (and teach) that norms matter—there is an entire literature on culture, identity, institutions, and “social preferences.” Yet standard micro textbooks still begin with an asocial individual with “given preferences,” and treat society as an add-on. That move is not harmless abstraction. It is the root of our inability to theorize justice—and it quietly pushes us back toward the Thucydidean conclusion that power defines justice.
Geoffrey Hodgson’s How Economics Forgot History names the methodological catastrophe: the switch from historical–qualitative political economy to formal–quantitative modeling trained economists to search for physics-like invariant laws in a domain where the objects of study change through history. When norms, institutions, and even emotional repertoires evolve, the dream of invariant “economic laws” becomes a category error. Read more…
Why do economists never mention power?
from Lars Syll
The intransigence of Econ 101 points to a dark side of economics — namely that the absence of power-speak is by design. Could it be that economics describes the world in a way that purposely keeps the workings of power opaque? History suggests that this idea is not so far-fetched …
The key to wielding power successfully is to make control appear legitimate. That requires ideology. Before capitalism, rulers legitimised their power by tying it to divine right. In modern secular societies, however, that’s no longer an option. So rather than brag of their God-like power, modern corporate rulers use a different tactic; they turn to economics — an ideology that simply ignores the realities of power. Safe in this ideological obscurity, corporate rulers wield power that rivals, or even surpasses, the kings of old.
Are economists cognisant of this game? Some may be. Most economists, however, are likely just clever people who are willing to delve into the intricacies of neoclassical theory without ever questioning its core tenets. Meanwhile, with every student who gets hoodwinked by Econ 101, the Rockefellers of the world happily reap the benefits.
The rich control the media: Whining is not a strategy
from Dean Baker
If anyone doubted that the rich would use their control of the media to push their agenda and silence dissent, CBS removed it with its decision to censor the scheduled 60 Minutes broadcast on CECOT prison. CECOT is the notorious maximum security prison in El Salvador where Trump has sent a number of the people that he has deported. There have been numerous accounts of torture and abusive treatment in the prison, which presumably would have been highlighted in the segment.
CBS, under its new ownership, decided that we shouldn’t see the 60 Minutes segment, or at least not the one its team had prepared for broadcast last night. Apparently, they were worried it would offend the Trump administration.
According to a leaked account, Bari Weiss, the right-wing zealot that the new ownership put in charge of CBS News, decided that the program could not air without an interview with Stephen Miller, Trump’s deporter-in-chief. The producers of the show had apparently already reached out to the White House, as is their standard practice, but they refused to comment, presumably choosing to instead attack the broadcast as unfair and unbalanced after it ran. Read more…
Sweden’s unequal wealth distribution
from Lars Syll
Global Wealth Report 2025 reveals that Sweden — once a global beacon of equality — has now fallen to the far less enviable position of sixth place among the world’s most unequal countries in terms of wealth.
How could things have gone so wrong for a country that, not so long ago, was seen as a model of equality?
Almost a decade ago, Thomas Piketty’s Capital in the Twenty-First Century hit the shelves. In many ways, it marked a turning point in the global conversation about economic inequality. But last year, Swedish economics professor Daniel Waldenström, of the Research Institute of Industrial Economics (which is controlled by the Confederation of Swedish Enterprise, an employers’ organisation and an interest group for Swedish business), published the book Superrika och jämlika: Hur kapital och ägande lyfter alla (Super-Rich and Equal: How Capital and Ownership Lift Everyone), arguing that Piketty is fundamentally wrong about the trajectory of wealth inequality. Read more…
Merry Christmas and a happy new year.
I´ll keep it personal. But for the ribbons, all items of the wreath, including the willow twigs underneath and the oyster shells, are gathered, not bought.
Next year, we have to keep up the fight for public health, public education, public environmental policies, public research and development, public money and public sanity, mental and otherwise. I´m surely not against private companies or against markets. But we have to fight the onslaught on public provisions.
new issue of RWER
real-world economics review
issue 112
download whole issue
ECONOMICS 100: Overpopulation is a wicked problem
Theodore P. Lianos 2
The transformational role of artificial intelligence in the pursuit of good economic governance
Constantine E. Passaris 21
Elements for a radical inflation targeting
Carlos Guerrero de Lizardi 36
Beyond homo economicus: an interdisciplinary critique of rationality in economic decision-making
Constantinos Alexiou 47
The Solow residual or what happens when moral philosophers try their hand at natural philosophy
Bernard C. Beaudreau 66
Teaching economics of populism
Junaid B. Jahangir 86
Strength and weakness of Germany’s economy
Leon Podkaminer 101
Gendered exposure to artificial intelligence in labor markets
Daniel Petrov 108
The confident falsehoods of economists and the Nobel Prize
from Lars Syll
Faced with economic theory’s apparent inability to address real economic and financial problems, economists retreat into the wonderful world of models. Instead of constructing theories based on empirical facts, they abandon the real world and prove things about imagined ones. If the goal is knowledge about the real world, the value of these exercises is, to say the least, unclear.
When the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was established in 1969, there was no problem whatsoever in finding worthy laureates. Gradually, however, the pool of obvious candidates thinned, and less self-evident names began to figure in the discussions. A theoretical and ideological bias also became increasingly apparent.
Almost exclusively, economists representing the dominant orthodoxy were considered. Other important schools and theories were ruled out from the start. They had not devoted themselves to refining the toolbox, but had directed their research efforts towards analysing and trying to understand the conditions for economic growth and an environmentally sustainable development and transformation of our economy.
Of the 99 laureates since 1969, two-thirds are American, and 35 of the winners have been affiliated with the University of Chicago at the time of the award or for their prize-winning research. Three of the 99 laureates have been women. Read more…
We need citizen´s CBDCs (Central Bank Digital Currencies), ultimately controlled by parliaments and not by central banks.
Summary: A Central Bank Digital Currency can aid citizens and companies. But national parliaments, not central banks, should have the final say about its design. Also, privacy and lowering costs, not combating the black and criminal economy and terrorism, are paramount for its success.
This is a bit of a note to myself, my ideas about this might change when I learn more.
Central Banks are developing CBDC´s: Central Bank Digital Currencies. This is a new kind of money, issued by a Central Bank. You can carry it on your mobile phone or on a card. You can pay in shops with your phone or your central bank card, even if the internet is down. The same applies if the electronic payment system is down and you want to order a book online.
Trump gives the country an economics lesson on tariffs
from Dean Baker
Trump first announced his massive tariffs on “Liberation Day,” which was April 2. This was supposed to be the beginning of the United States rebuilding its manufacturing capacity. Since Liberation Day, the economy has lost 60,000 manufacturing jobs, factory construction is down at least 5 percent, and inflation has risen to 3.0 percent.
It is also clear that businesses and consumers here have paid Trump’s tariffs, not foreigners as Trump seems to believe. Import prices have risen since Liberation Day. These are the price of the goods we import before Trump imposes his tariffs. If exporters are eating the tariffs, then the import price index should have fallen considerably. The data show this is not true. Read more…
Conversations with heterodox economists
from Lars Syll
Jamie Morgan: To a member of the public it must seem weird that it is possible to state, as you do, such fundamental criticism of an entire field of study. The perplexing issue from a third party point of view is how do we reconcile good intention (or at least legitimate sense of self as a scholar), and power and influence in the world with error, failure and falsity in some primary sense; given that the primary problem is methodological, the issues seem to extend in different ways from Milton Friedman to Robert Lucas Jr, from Paul Krugman to Joseph Stiglitz. Do such observations give you pause? My question (invitation) I suppose, is how does one reconcile (explain or account for) the direction of travel of mainstream economics: the degree of commonality identified in relation to its otherwise diverse parts, the glaring problems of that commonality — as identified and stated by you and many other critics?
Lars P. Syll: When politically “radical” economists like Krugman, Wren-Lewis or Stiglitz confront the critique of mainstream economics from people like me, they usually have the attitude that if the critique isn’t formulated in a well-specified mathematical model it isn’t worth taking seriously. To me that only shows that, despite all their radical rhetoric, these economists — just like Milton Friedman, Robert Lucas Jr or Greg Mankiw — are nothing but die-hard defenders of mainstream economics. The only economic analysis acceptable to these people is the one that takes place within the analytic-formalistic modelling strategy that makes up the core of mainstream economics. Models and theories that do not live up to the precepts of the mainstream methodological canon are considered “cheap talk”. If you do not follow this particular mathematical-deductive analytical formalism you’re not even considered to be doing economics …
The kind of “diversity” you asked me about, is perhaps even better to get a perspective on, by considering someone like Dani Rodrik, who a couple of years ago wrote a book on economics and its modelling strategies — Economics Rules (2015) — that attracted much attention among economists in the academic world. Just like Krugman and the other politically “radical” mainstream economists, Rodrik shares the view that there is nothing basically wrong with standard theory. As long as policymakers and economists stick to standard economic analysis everything is fine. Economics is just a method that makes us “think straight” and “reach correct answers”. Similar to Krugman, Rodrik likes to present himself as a kind of pluralist anti-establishment economics iconoclast, but when it really counts, he shows what he is – a mainstream economist fanatically defending the relevance of standard economic modelling strategies. In other words — no heterodoxy where it would really count. In my view, this isn’t pluralism. It’s a methodological reductionist strait-jacket.
Trump RX: The merger of pharma corruption and Trump crazy
from Dean Baker
I haven’t given my diatribe on cheap drugs for a while, but what the hell. It’s a huge deal and no one in a position of power gives a damn (just like the housing bubble), but I’ll keep trying.
Just to remind everyone of where things stand, drugs are cheap. The government makes them expensive with patent monopolies and other forms of protection.
There are all sorts of self-imagined progressive types who see their goal in life as getting the government to rein in the market to end poverty and reduce inequality. In the case of prescription drugs, the problem is the government, not the market.
Drugs are almost invariably cheap to manufacture and distribute. They would sell for $10, $20, or $30 per prescription in a free market. The reason people end up paying tens or even hundreds of thousands of dollars for drugs they need for their health or life is because the government prevents competition that would bring prices down close to the drug’s cost.
We need to pay for the development of drugs, but we don’t need patent monopolies for that. We used to spend over $50 billion a year for biomedical research through the NIH and other government agencies. We would need to spend perhaps three times that amount to replace the research now supported through patent monopolies.
That additional $100 billion sounds like a lot of money, except we would likely save on the order of $550 billion a year on what we spend on drugs. We currently spend over $720 billion a year for drugs that would likely sell for around $150 billion in a free market. Read more…
Economics textbooks — scandalous intellectual dishonesty
from Lars Syll
It is well-known that Keynes frequently criticised more traditional economics for committing the ‘fallacy of composition.’ This fallacy essentially involves the mistaken belief that the whole is nothing more than the sum of its parts. Keynes argued that this is not the case in society or the economy, and that, a fortiori, an adequate analysis of either cannot proceed by simply adding up the acts and decisions of individuals. The whole is greater than the sum of its parts.
This issue is evident when mainstream economics attempts to argue for the existence of ‘The Law of Demand’ on an aggregate level — the idea that when the price of a commodity falls, the demand for it will increase. While one might succeed in establishing this law for single individuals, it was firmly demonstrated by the Sonnenschein-Mantel-Debreu theorem as early as 1976 that it is impossible to extend ‘The Law of Demand’ to the market level, unless one makes wildly unrealistic assumptions, such as all individuals having homothetic preferences — which effectively implies that everyone has identical preferences.
This would only be conceivable if there were, in essence, only one actor — the (in)famous representative agent. So, yes, it was possible to generalise ‘The Law of Demand,’ provided we assumed that on the aggregate level there was only one commodity and one actor. What a generalisation! Does this sound reasonable? Of course not. It is utter nonsense. Read more…
Are the new national account guidelines any good? 7. Capital services.
Summary: It´s meaningful to value fixed assets in the national accounts. As, however, not all transactions are capitalist market transactions and not all prices are capitalist market prices, the ´method of choice´ to value fixed assets proposed by the new national account guidelines, discounting expected future flows of income, is not as universal as suggested. Instead of one method, an amalgam of methods should be used, tailored to the specific ways fixed assets are used.
Weaponizing 21st century money
from Jamie Morgan
According to the Bank for International Settlements:
Society has a choice. The monetary system can transform into a next-generation system built on tried and tested foundations of trust and technologically superior, programmable infrastructures. Or society can re-learn the historical lessons about the limitations of unsound money, with real societal costs, by taking a detour involving private digital currencies that fail the triple test of singleness, elasticity and integrity.
According to Reuters, in the first half of 2025 the Trump family made more than $800m from crypto assets, and the Trump administration seems intent on normalising cryptocurrency as an investment asset and encouraging the world to adopt stablecoin as the future of money. Stablecoin are digital tokens that can be stored in a digital wallet and used for payment on blockchains. Their defining characteristic is that the issuer promises they will be redeemed for an equivalent sum of whatever the token was originally issued in exchange for. This is usually the US$, and there are more than $275bn in issued stablecoins. The issuer uses the $s it is paid to buy $ denominated securities, and it is these that stand behind the promise. However, on any given day, there is no guarantee that the different varieties of $ stablecoin will all have the same value across the many platforms they are available on. Moreover, if there is a sudden increase in people redeeming their stablecoin, then the issuer may be forced to rapidly sell assets held in their “reserve” – in worst cases this is a “firesale”, equivalent to a run on a bank. The more stablecoin there are, the more impactful this effect becomes and a “systemic stablecoin” would be big enough that its selling activity might drive down securities prices. The obvious implication is that securities would be sold for less than they were bought for. Not only would this affect the ability of the stablecoin issuer to fulfil its promise, but also the pricing effect would knock-on to any other user of and trader in securities. In the modern world of collateralisations and repos, this is the territory of margin calls and financial crises… The Achilles heel of a financialized system. Read more…
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—— Ugarteche, Puyana and Madi ——
Gerson Lima / Maria Alejandra Madi
Edward Fullbrook and Jamie Morgan
————— Michael Hudson ————–
Maria Alejandra Madi / Jack Reardon
————- Edward Fullbrook ————-
—————— Steve Keen —————–
————— Richard Smith —————
————– Gustavo Marques————
– Victor Beker and Beniamino Moro –
————– Lars Pålsson Syll ————-
—————– Stuart Birks —————-
Edward Fullbrook and Jamie Morgan
———— Armando Ochangco ———-
Shimshon Bichler / Jonathan Nitzan
————— Mauro Gallegati ————–
————— Herman Daly —————-
————— Asad Zaman —————
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