[I expanded the introduction to the original post and sent it to Real World Economics Review Blog, where it is now posted.]
The challenge, and reactions to it
Many economists, and more non-economists, agree that economics needs new ideas, given the comprehensive failure of the mainstream to foresee the Global Financial Crisis and its continuing failure to lift the US and Europe out of deep recession or depression.
[In preparing a pitch to some possibly supportive people, I realised I have not spelt out in brief form the argument that economies are complex self-organising systems. There is a straightforward logic, it is not simply a preference pulled out of the air, or the depths of my psyche.]
Many economists, and more non-economists, agree that economics needs new ideas, given the comprehensive failure of the mainstream to foresee the Global Financial Crisis and its continuing failure to lift the US and Europe out of deep recession or depression. Yet few seem to know where to start, and there seems to be little agreement on how much the subject needs to change. When proposals appear that might begin to address fundamental problems, many economists seem to recoil, and others seem simply to fail to recognise that the proposals have any relevance.
[After a break for family business and time out, here is a bit of vindication.]
Olaf Storbeck is the International Economics Correspondent with Handelsblatt, Germany’s business daily. Based in London, he is writing about current economic research. Here he interviews Andrew Haldane.
Andrew Haldane is the Bank of England’s Executive Director for Financial Stability. I recently talked to him about the crisis of contemporary economics and the way forward.
You are vocal critic of mainstream macro economics. How does this square with the tradition of central banks who historically have been very conservative institutions.
Eight Elementary Errors of Economics is discussed with Karl Fitzgerald of Melbourne community radio 3CR (855 am).
Karl does a program called Renegade Economists, part of the efforts of Earthsharing Australia. Good people, have a look and listen.
The interview can be heard here (Renegade Economists 18.07.2012). Have a listen, it came up pretty well.
Whether economics can be a science, and whether mathematics has a place in economics or economic science, seem to be vexed questions among heterodox economists. Having been a natural scientist for over four decades and thought hard about the nature of science and the place of mathematical models within it, I would hope to offer some clarification on these issues. After discussion, this post will be put in a permanent page.
The long, and slightly modified, version of Eight Elementary Errors of Economics is now on SteveKeen’s Debtwatch. Reblogged on Business Spectator, 22 June and The Bull 23 June. I consolidated two of the previous points and added what is now the final point on emergent wealth of land. See also on Real World Economics Review Blog, 7 June, with long discussion.
Post edited 4 July: the full modified version now follows, so it’s all consolidated here.
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.
There has been a lively discussion of Eight Elementary Errors of Economics at Real World Economics Review Blog. Here are a couple of exchanges that raise good points. (If these commenters respond further I will post them here, in fairness to them.) There has also been discussion of history, science, love and other topics. You might like to have a look.
[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.
[This article is based on extracts from The Nature of the Beast: how economists mistook wild horses for a rocking chair eBook. Guest-Posted on Steve Keen’s Debtwatch site 1 June.]
Any discussion of the nature and role of money in modern economies typically brings out a plethora of confusing or conflicting theories, claims and counter-claims about what money is, what role it plays, what dysfunctions it might be responsible for and how they might be fixed. One common set of claims is that money is a unit if account, a medium of exchange and a store of value. I argue the first property is a trivial one and the last is only true if the money is wholly or in part a real commodity, like a pig or some tobacco.
[Extractfrom The Nature of the Beast, Chapter 4]
Prior to the twentieth century, science had built up a picture of the universe as a giant clockwork. Starting with an investigation of mechanics by Galileo, a series of “laws” had been inferred, and these laws were extremely successful in describing the physical world. It seemed that the world had been reduced to causes and effects that were precisely known, and therefore it would tick inexorably along according to those laws. This view was very discomforting to philosophers and theologians, among others, because it seemed to eliminate free will, and to imply that our fates were all sealed at the beginning of time. The neoclassical theory of free markets is firmly of the clockwork universe kind.
However science underwent three revolutions during the twentieth century, revolutions that profoundly changed scientists’ views of the universe.
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