The sense of frustration when you came across an alternative explanation that neo-classical had not thinking on nearly did my interest in economics for a long time, retreated to economic history, then later in life did the mathematics properly but still no significant shift to alternative thinkers and paradigms. Anything not amendable to classical theory or to hard to explain is left to externalities, the law of unintended consequences seems to have never been heard of,GPI v GDP is one more example, the fairy tale thinking around the PPP Curve or non thinking, besides the obvious, how can you trust a discipline that swaps around the understood mathematical convention on x and y axes.

Part of the pomposity of certain rigid economic dogmas is that only a single form of economic organisation, ‘capitalism’ has been able to resolve many key economic questions and serious social and human problems. Herman Daly once said at a lecture in Ireland that because we cannot think about the resource limits and the waste of our activity properly we are about the find out that the following theories which supposedly modern consumer capitalism has overcome will now reappear begging our attention; Malthus and population, Marx and the distribution of income, Keynes and unemployment and the laws of thermodynamics (entropy).

We have inflated money supply to the extent that we could sustain a level of global aggregate demand that now exceeds replacement or replenishment. We will also rediscover that the pull of debt is negative on a number line and once you accumulate sufficient quantities of promises against future income or asset values, you have reached total market saturation point. The brake on business as usual is not money or financial instability it is the sharp and severe signal transmitted to the world economy by food and energy prices reflecting shortfalls in demand and supply that are now permanent. Those two cost variable will from here on in play havoc with all economic systems, energy scarcity also introduces increased ROI or EIROI dictated by physical laws not economic, pushing up effort and cost. Simple fact price signals delude from the fact that the poor and those consumers in poverty fall out of the demand equation as they have none or it takes many consumers to make up one unit of demand, these many many millions of consumers are fractals on the demand curve, exponentially decreasing. When you count in wholes you miss the parts. The evidence is out there if you look.

During my time putting together some of the GDP stats in the early 80s I became very uneasy with the basic GDP measures – both income and expenditure sides.

It is good to see that some of these problems are captured in the Wiki GDP entry under the heading – “Limitations of GDP to judge the health of an economy”
http://en.wikipedia.org/wiki/Gross_domestic_product

You know there is something fundamentally wrong with the GDP measure when smashing this computer and buying a new one would result in positive GDP. Like when Gary Oldman smashes the glass in The Fifth Element. http://www.youtube.com/watch?v=Tt1W0F0yObg

I cannot see how a new economic school (eg Keenomics) is going to rise above the neo-classical model unless we also address the fundamental way we measure the economy.

It would be great to see sustainability built into the measure of GDP – but then we would not be wanting growth rather stability.

I’ve already read the “The Death of Economics” and found it quite fascinating. What I liked was the fact that he endured the hatred of the economics profession while at the same time some economists privately admitted to him that they agreed with his views that something was wrong with conventional economic theory.

I read his book along with John Gray’s “False Dawn: The Delusions of Global Capitalism”. Gray was also denounced for calling neoliberalism into disrepute, but now he is praised as one of the few economists to see the GFC coming.

http://www.independent.co.uk/news/world/politics/philosopher-john-gray-were-not-facing-our-problems-weve-got-prozac-politics-1666033.html

The most stinging critiques I’ve discovered so far are Steve Keen’s Debunking Economics, Joseph McCauley’s “Response to ‘Worrying Trends in Econophysics’”, and Mark Blaug’s “Disturbing Currents in Modern Economics”.

There are, of course, many others that I will have to read in due time.

GSM,

Environmental impact studies performed or contracted out by the firm itself is a conflict of interest. They should be authored by independent third-parties, possibly funded by government but with no government interference.

Lyonwiss,

I find that “narrative fallacies” tend to be quite common, with economists spending the time to discuss the costs and benefits without properly monetizing them in any fashion to produce a clear conclusion. If one was performed on intellectual property rights, it would collapse in a second.

Does anyone else know of books (and journals) that are similar to Debunking Economics?

Probably the best one I can think of is “The Death of Economics” by Paul Omerod. It was written when he was young and still had the grit to stand up to the establishment, Omerod has gotten older and wiser since then but the book remains.

The shift from making decisions by company owners (in the 19th century) to making decisions by a cast of managers responsible to nobody and armed with golden parachutes also contributed greatly.

Ahhh, yes now I can agree with you entirely. The professional management class staged a quiet coup by separating shareholders from management decisions (even very basic decisions like executive remuneration). In the 19th century it would have been unthinkable.

However, government contributed to this coup by creating an expectation that shareholders should somehow be isolated from risk and responsibility and by reassuring people that regulation was solving problems. The only thing that solves the problem is for shareholders to get burnt a few times and wake up from their slumber. Creating an illusion of safety in investment is nothing short of a confidence trick.

Why do we put the future of our country into the hands of conmen? Because it is convenient for the centralised power structure to manipulate the viewpoints of their constituents (and they have found ways to be very adept at this). The only answer is to throttle back the power of centralised government, and teach people to think for themselves again.

Please don’t think I am a socialist – I was very happy to see the demise of that moronic system. But I don’t agree that there is no issue now and the neo-liberal system will always self-right itself.

Well, everyone seems to think that the current problems were brought on my excess debt and it seems obvious to me that the free-market is working its guts out to purge itself of unwanted debt. Government response is to create more debt to fill up the hole and make the market work twice as hard to purge that debt.

Think of it like a man who has eaten bad food and is now curled up heaving out vomit. He will be sick for a while, but when it is clear he will be OK again. Along comes Mr Government Bailout and tries to spoon the vomit back into his mouth. Git it in ya!

http://www.abc.net.au/lateline/content/2008/s2558853.htm

in summary, if you can’t pay in cash (because money supply is short) then offer something you do have as payment.

Sadly, government intervention makes this pretty much illegal in most “modern” economies, but the principle is well demonstrated by even a single example. If people can create their own money-equivalent then recession is impossible.

I read the article when it first appeared on the Independent’s website a while ago. If you look you will find similar accounts by the Wall Street types who realize the damage they are doing to society.

Thanks to corporate ideology and neoclassicism, what they do everyday is rational and leads to the best possible outcome for everyone. For some, it is difficult to argue against until the realization occurs that the economic models that is used as a rationalization are actually quite nonsensical.

Does anyone else know of books (and journals) that are similar to Debunking Economics?

The Headline;
“BHP’s Olympic Dam mine to kickstart recovery”

….. buried in the article;
“Mr Rann adopted a more conciliatory note yesterday, welcoming the EIS.
“We will work with BHP Billiton to maximise the number of jobs here … the point is it hasnot yet been approved,” Mr Rann said.”

I know for a fact that BHP has cancelled it’s order for the fleet of off highway dump trucks they had on order for this project.

http://www.theaustralian.news.com.au/story/0,25197,25416641-5006787,00.html

It’s all bulls**t. BHP had this done and ready on the shelf. They have already let go and re-allocated the staff that were preparing for this project.