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First Bank of the Living Dead

August 25th, 2010

That’s the title of Daniel Drezner’s review Zombie Economics along with several other post-crisis books. I’m glad he likes the title, but he offers what seems to me to be a rather unfair representation of my argument. As the author, I’m not exactly unbiased, so see what you think.

Here’s Drezner

… Quiggin is clear-eyed about Keynesianism’s failures as well as its successes, but he believes that:

The failures of the 1970s were the result of mistakes that could have been avoided with a better understanding of the economy and stronger social institutions. If so, the current crisis may mark a return to successful Keynesian policies that take account of the errors of the past.

He might be right, but if so it would contradict everything else contained in Zombie Economics. Quiggin thinks he’s only writing about the failure of free-market ideas, but he’s actually describing the intellectual life cycle of most ideas in political economy. All intellectual movements start with trenchant ways of understanding the world. As these ideas gain currency, they are used to explain more and more disparate phenomena, until the explanation starts to lose its predictive power. As time passes, the original ideas become obscured by ideology, caricature and ad hoc efforts to explain away emerging anomalies. Finally, enough contradictions build up to crash the paradigm, although current adherents often continue to advance the ideas in zombielike form. Quiggin demonstrates with great clarity how this happened to the Chicago school of economics. How he can think it won’t happen with whatever neo-Keynesian model emerges is truly puzzling.

And here’s the full quote from the book along with the preceding couple of paras

How then, should we think about the Keynesian era and its failure?

One possible interpretation, a pessimistic one, is that business cycles are so deeply embedded in the logic of market economics, and, perhaps of all modern economies, that they cannot be tamed. Success breeds hubris, and hubris leads us to ignore the lessons of the past: that resources are always constrained, that budgets must ultimately balance, that wages and other incomes cannot, for long, exceed the value of production and so on. It the 1960s and 1970s, this hubris manifested itself in unsustainable budget deficits and the wage–price spiral. In the 1990s and 2000s, it was seen in the speculative frenzy unleashed by the self-styled Masters of the Universe in the financial sector.

But this is not the only possible interpretation.

Perhaps the failures of the 1970s were the result of mistakes that could have been avoided with a better understanding of the economy and stronger social institutions. If so, the current crisis may mark a return to successful Keynesian policies that take account of the errors of the past. (emphasis added)

It’s only one omitted word, but I think it makes a difference.

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  1. James Haughton
    August 25th, 2010 at 09:58 | #1

    It would be more accurate to say it describes the political life cycle of ideas in intellectual economics. I think it’s pretty clear that ideas in economics are taken up into and dropped from the “mainstream” according to their usefulness to whoever is in power, not because of their explanatory power or lack thereof. Keynesian economics was dropped because it was inconvenient to the Reagan/Thatcher era politicians and businessmen who wanted to shift the balance of power decidedly towards Capital. Friedman was just the figleaf.

    PS Don’t talk to me about stagflation. If your response to a massive real price shock and running the most costly war in history is to massively expand the monetary supply, of course you’re going to get out of control inflation.

  2. Sam
    August 25th, 2010 at 11:13 | #2

    It the 1960s and 1970s, this hubris manifested itself in unsustainable budget deficits and the wage–price spiral.

    Small typo there John. It should be “In the 1960′s and 1970′s”

    I guess it’s too late now, but perhaps something to change in the second edition?

  3. Jim Rose
    August 25th, 2010 at 12:20 | #3

    John,

    years ago in a methodology course we looked at a paper that reviewed various errors in referencing of quotes.

    the author has a grant to hire an assistant to check quotes.

    he found that the most common error in the quoting of other’s work was leaving out the word ‘not’.

  4. August 25th, 2010 at 13:03 | #4

    @Sam
    “It should be “In the 1960?s and 1970?s””

    Don’t replace a typo with a grammatical error. It should be “In the 1960s and 1970s”.

  5. Mozzie
    August 25th, 2010 at 14:33 | #5

    Wikipedia “The National Interest (NI) is a prominent conservative American bi-monthly international affairs magazine published by the Nixon Center. It was founded in 1985 by Irving Kristol and until 2001 was edited by Anglo-Australian Owen Harries.”

    You probably shouldn’t expect a straight review from this quarter! Look at these misquotes as part of the whole apologia for TBTF from that political position. Got feel sorry for a slightly misinformed group forced further to the right by Fox and who now feel obliged to kowtow in the direction of the Tea Party and Westboro Baptists. “Economic Policy? -we don’t need no freakin’ policy”.

  6. Jim Birch
    August 25th, 2010 at 14:55 | #6

    “Quiggin thinks he’s only writing about the failure of free-market ideas, but he’s actually describing the intellectual life cycle of most ideas in political economy.”

    This is an interesting statement but I’m not exactly sure what Drezner is saying. If economics is just a set – or sets – of animating ideas, neither right or wrong, but providing a normative basis for action then your book is just part of the life cycle of some social ideas. OTOH, if economics, despite it’s deficiencies, actually has a basis in reality, it’s a bit of weird critique: while it may be true, we would hope that empirical truth might actually be a determinant in the life cycle. In that case – lo! – the emerging neo-Keynesian model might actually be better. The idea that it’s all just a sequence of fashionable ideas is kind of meta-zombie.

  7. paul walter
    August 25th, 2010 at 15:11 | #7

    I think Jim Birch sums it very well.
    ’nuff said for now, till have gone back and chewed it over again.
    Ernestine Gross, heelpp!!

  8. gerard
    August 25th, 2010 at 16:13 | #8

    I expect you’re going to get more vicious reviews than this.
    Just look at some of the foamy-mouthed ‘Freshwater’ reactions to Krugman’s little article, and his target was much smaller.

  9. Julian
    August 25th, 2010 at 16:31 | #9

    Will this be available on e-book / Kindle ?

  10. Alice
    August 25th, 2010 at 16:38 | #10

    This review seems to be taking the perspective of thesis to antithesis and finally to synthesis and even if Prof Q is part of the antithesis it only means he performs a valuable function

    (to clear out old deadwood disproved rubbish paradigms and their zombies).

    The title says that anyway…

  11. Sam
    August 25th, 2010 at 17:49 | #11

    @Jarrah

    Ah yes! Apologies for that!

  12. Michael of Summer Hill
    August 25th, 2010 at 18:38 | #12

    John, is this the same so-called professor who thinks ‘History of political science is not widely taught’ given ‘The American Political Science Association was founded in 1903 and the American Political Science Review was founded in 1906 in an effort to distinguish the study of politics from economics and other social phenomena’.

  13. Chris Warren
    August 25th, 2010 at 18:40 | #13

    One can only smile at these reviewers when they winge:

    THE WHYS and wherefores of economic calamities as yet unsolved,

    This just means they have not understood Marx.

  14. jquiggin
    August 25th, 2010 at 19:25 | #14

    E-book versions should come out simultaneously with paper

  15. August 26th, 2010 at 03:44 | #15

    Chris,
    So – if we understand Marx, we understand what an economic calamity is? I can agree with that.

  16. James Haughton
    August 26th, 2010 at 10:22 | #16

    Andrew Reynolds wins 1 internetz.

  17. paul walter
    August 26th, 2010 at 12:49 | #17

    Yes AndrewReynolds, like the one just avoided from 2007 (here, if not offshore). Although the Labor response from 2007, before they lost their nerve, does illustrate the evolutionary transformation of ideas suggested by Quiggin: its just that neoliberalist reaction has left too much dead wood for Social Democracy to clear away yet, this time.

  18. Declan Trott
    August 26th, 2010 at 15:57 | #18

    My reaction, purely on the basis of the quoted paragraphs, is that it is a fair quote (particularly as he left in the “if so” in the second sentence). I get a strong impression that the author favours the second over the first interpetation!

  19. Julian
    August 27th, 2010 at 15:25 | #19

    @jquiggin
    Excellent, thanks John – I look forward to grabbing a copy

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