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.
[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.
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.
A complete manuscript of The Nature of the Beast is available for comment. It is under a password, so as not to upset potential publishers, and so I can keep track of who is looking at it. I would love to have feedback of any kind.
Use the Books and Downloads menu above, or go here.
A sample, the first 16 pages, can be downloaded without password.
[After a 6-month break I have returned to working on The Nature of the Beast. A new version of Chapters 1-4 is available for download and comment – use the links at the top. More will follow soon. To whet your appetite, here is a sample, from the Introduction.]
The Global Financial Crisis, also known as the Great Recession, is the biggest economic malfunction since the Great Depression. You might think that those in charge when it happened, and those who designed the economic system within which it occurred, would have been chastened and purged, to be replaced by those who saw the crash coming and those who warned that the design of the economic system was prone to such failures.
However few of those responsible have been purged, and few seem to have felt chastened. Rather, they claim that no-one could have seen the crash coming. If that were true, what exactly has the economics profession been doing for the past eighty years? Everyone knows there was a Great Depression. Would it not be a top priority to figure out how it happened, so we might see the next one coming, or better still avoid the conditions that would trigger a depression? One might think so, but that is not how the great bulk of the profession has spent the past eighty years.
[This post is addressed to fringe economists and others who have broken with ever-more dysfunctional mainstream neoclassical economics, but who still search for a replacement paradigm.]
[2 Aug: Posted on Real-World Economics Review Blog.]
The need for a new conception of economics is widely acknowledged in the wake of the global financial crisis[1], at least outside of diehard neoclassical circles. However a common perception seems to be that no adequate and coherent general conception is in sight, though many loosely related or unrelated heterodoxies vie for attention, as noted by the Editor of Real World Economic Review blog. I argue here that when the subject is approached from the point of view of dynamical systems a broad new framework becomes evident. Furthermore, once the nature of the beast is identified, some fundamental conclusions can immediately be drawn.
Extracts from Economia.
The writing of Economia was essentially completed in 2003. It was obvious then that the global financial system must come to crisis within a few years.
The Global Financial Crisis, serious as it is, is only part of a deeper crisis reaching to the core of how modern economies are conceived and managed. The problem is not just that financial markets have acquired excessive power and are greedy, corrupt, unstable and destructive. It is not even that the GFC has not yet shown us its worst, as Steven Keen argues (Declaring victory at half time). It is that mainstream economists have fundamentally mis-identified the nature of the beast they are dealing with.
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