Tag Archives: free markets

Eight Elementary Errors of Economics

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[This is my most recent attempt to encapsulate the deep flaws in mainstream economics, and the sensible alternative struggling for recognition.  Posted 7 June at Real World Economics Review blog, with a lively discussion following.]

The Global Financial Crisis, the extreme inequality of wealth world-wide, the materialism of modern life and the dire state of the planet are not accidents, nor just unavoidable consequences of the nature of things.  They are the result of the modern practice of economics, which makes elementary errors of accounting, evidence, perception and theory.

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The Nature of the Beast: eBook now available

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The Nature of the Beast: how economists mistook wild horses for a rocking chair.

Mainstream free-market economics fundamentally mis-identifies the nature of market economies.  Its record is of retarded growth followed by disaster.  It counts costs as positives instead of negatives.  It is blind to how the present banking system destabilises the economy.  It is relentlessly materialistic and adversarial.  It ignores most of what we know about real people and the real world.

The result is pseudo-scientific gobbledygook, and the unstable, inequitable, undemocratic, destructive and unsustainable mess known as the global economy.

The Nature of the Beast draws out the real nature of market economies using modern knowledge of systems, human behaviour, ecology, biology and physics.  It points the way to stable, prosperous, democratic market economies that can support people, societies and the living world into the indefinite future.

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Bad theory, Bad Practice – Bad Ethics

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[ The three earlier posts “How free-market fundamentalists are hopelessly wrong” are extracted from a paper that is now published by the World Economics Association in an on-line conference on Economics in Society, the Ethical Dimension.  The full text of the paper follows, covering more deficiencies of the mainstream and some new modelling illustrating a more useful approach.   A pdf can be downloaded here (300 kb) ]

A profession that claims to understand economies, and that has gained power over the greater part of our societies, has big responsibilities.  The fundamental responsibility is to ensure its perception of economies gives some useful guidance to the behaviour of real economies.  Here mainstream economics fails utterly, and has been failing for a long time.  Worse, it actively resists alternative views that might overcome its failings.  Ethics do not come much worse than that.

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How Free-Market Fundamentalists are Hopelessly Wrong, III: money, debt and blindness

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Part I presented the evidence that economies in the free-market era delivered only mediocre performance before crashing in the disastrous Global Financial Crisis.  Part II showed how the standard theory of free markets bears no useful resemblance to real economies, and its application amounts to pseudo-science.

Returning to the GFC now, there is a particular reason free-market economists claim the GFC was unforeseeable:  debt and money play no role in their standard equilibrium economic models.  They claim one person’s debt is another person’s asset, and so aggregate “demand” is not affected by debt.  This would be true in a barter economy, or if the banking system was based entirely on savings, for only in those cases would the extra purchasing power of the borrower be balanced by the reduced purchasing power of the depositor.

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How Free-Market Fundamentalists are Hopelessly Wrong, II: the theory

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In Part I we saw that readily available evidence shows clearly that economic performance in the free-market era that began around 1980 was already poor, even before the disaster of the Global Financial Crisis.  Here we look at the theory that underlies the free-market rhetoric, the so-called neoclassical theory.

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How Free-Market Fundamentalists are Hopelessly Wrong, I: the evidence

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Australia’s commentariat is thickly populated with right-wing guardians of the doctrine of free markets.  Many of them have been groomed by right-wing think tanks in a long-term campaign to drag our perceptions to the right.  Chris Berg and Sinclair Davidson, of the Institute of Public Affairs, are regulars on the ABC’s The Drum Opinion.  The campaign has been highly successful, as the free market mantra has taken over both sides of politics and dominates economic discussion.

However it is very easy to demonstrate the doctrine is hopelessly wrong.  The evidence is clear that free markets have retarded growth.  The theory underlying the doctrine is plainly and absurdly unrealistic.  The Global Financial Crisis was caused by financial markets building up mountains of debt, yet debt and money are absent from mainstream economic models and, apparently, from economists’ thinking.  Hence their blindness to the GFC’s approach, its cause and its remedy.

These problems will be covered in a three-part series.  First, the evidence.

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How Thriving Industries Can Save the Planet

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Recently we broke the glass carafe on our drip coffee maker.  Yes I know it’s very last-century, but I still like drip coffee.  A search on line revealed that that model was no longer manufactured, even though the basic design has been stable for decades.  The carafe of a related (read “different-shaped”) model cost about $35, excluding the hassle of ordering and delivery.  The local shop had a whole new coffee maker for about $40.  So of course we threw away the perfectly good old model, sans carafe, and got the new one.

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