Bookblogging: new name(s), new intro (slightly updated 18/8)

The current working title for the book is Zombie Economics: Six Dead Ideas that Threaten the World Economy (suggestions for a better subtitle are welcome) and that requires a new intro.

Also, I’ve come to the view that “market liberalism”, as opposed to “economic liberalism”, is a better name for the viewpoint, based on the efficient financial markets hypothesis and other ideas criticised here, that has dominated policy thinking in recent decades.

Any thoughts on these points, or the revised intro, would be most welcome.


The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. JM Keynes

Ideas are long-lived. They often outlive their originators, and, even when they have proved themselves wrong and dangerous, they are very hard to kill.

Before the global financial crisis ideas like the Efficient Markets Hypothesis and the Great Moderation were very much alive. Their advocates dominated mainstream economics and their influence, acknowledged or not, guided the thinking of the practical men and women whose decisions created a financial system in which tens of trillions of dollars of interlinked obligations were built on a foundation of speculative, or entirely spurious investments, and a global economy in which both households and nations lived far beyond their means.

Today these ideas appear to be defunct. Commentators who were proclaiming, a year or two ago, that the business cycle had been tamed, and replaced by a Great Moderation in economic activity, have admitted their error or, more commonly, moved on to talk of other things. The claim that financial markets make the best possible use of economic information, and can never be subject to irrational bubbles, is rarely made, and usually hedged with all kinds of qualifications and escape clauses.

But habits of mind and thought are hard to change, especially when there is no ready-made alternative. The ideas that brought the global financial system to the brink of meltdown, and have already caused thousands of firms to fail and cost millions of workers their jobs, still underlie the thinking of those who are trying to respond to the crisis and, to a large extent, of the commentators and analysts who assess those responses. These ideas are neither alive nor dead; rather, they are undead, or zombie ideas. Hence the title of this book.

If we are to understand the financial crisis, and avoid the kinds of responses that set the stage for a new and even bigger crisis in a few years time, we must understand the ideas that got us to this point. This book describes six ideas that have played a role … Some of them, like the Efficient Markets Hypothesis and Micro-based macroeconomics belong to the realm of technical economic theory. Others, such as privatisation and central bank independence are specific policy prescriptions, ultimately derived from these abstract ideas. Still others like the Great Moderation and Trickle-down economics, are catchphrases that incorporate a set of claims about how the economy works, or worked in the thirty years or so before the current crisis.

Together these ideas form a package which has been given various names: : Thatcherism in the United Kingdom, Reaganism in the United State, economic rationalism in Australia, the Washington Consensus in the developing world and “neoliberalism’ in academic discussions. Most of these terms are pejorative, reflecting the fact that it is critics of a dominant theoretical or ideological framework who feel the need to define it and analyse it. Politically dominant elites don’t see themselves as acting ideologically and react with hostility when ideological labels are pinned on them. From the inside, ideology usually looks like common sense.

The most neutral term I can find for the set of ideas described by these pejoratives is ‘market liberalism’, and this is the term that will be used in this book.

The book is organised in a way that I hope will help readers to understand how market liberalism depends on ideas that have failed the test of the global financial crisis, and which, if they continue to influence policy, will ensure a repetition of the crisis. Each chapter starts with a section describing the beginnings of the idea, followed by a section on its theoretical and policy implications. The next section describes the failure of the idea. In most cases, problems were evident well before the current crisis, but those who pointed them out were dismissed or ignored. The final section, entitled “What next”, looks at alternative ideas that may point to an alternative to market liberalism. The final chapter, “Economics for the 21st Century” looks more generally at the kind of policy ideas that will be needed in the light of the failure of market liberalism. A simple return to traditional Keynesian economics and the politics of the welfare state will not be sufficient. It is necessary to develop both economic theories and policy programs that respond to the realities of the 21st century economy.

1. There’s a similar problem of terminology on the other side of the debate. The success of market liberalism was the result of a reaction against a set of ideas and policies commonly referred to as “social liberalism” or “social democracy” in Europe and simply as “liberalism” in the United States. The distinctions between the positions implied by these different labels will not matter for the purposes of this book. What matters is that all of them included a commitment to full employment, based largely on Keynesian economic management, and a major role for the state in the provision of income security and services such as health and education.

75 thoughts on “Bookblogging: new name(s), new intro (slightly updated 18/8)

  1. yes

    If the subtitle Links in with the main title: Zombie and Living dead – then it seems to work.

    But just “zombie” seems to indicate either a patronising or a populist approach.

    To actually win the debate – we need serious, profound, refutations, or at least this is what reviewers will be looking for.

    Zombie economics by itself on bookshelves could just be yet another winge about economics, that would not tempt me to buy or review given other options.

  2. The titles good, the real problem is what is the right price for an assets. Clearly it isn’t the last share market transaction price by the number of shares held on the 30th of June. As I have complained before the share market price is set by traders trading a small percentage of the stock.

    If your seriously buying assets and not placing bets on there price movement then really your trying to guess their future earning potential, and that depends on many things. For instance carbon polluters may have to start paying for the damage they do.

    Willing to make a bet on the outcome of the CPRS? Well there are lot companies that will be effected, there are lots of ways to place your bet.

    The stock market is a place to place your bets, is the stock market a casino or a place to value assets? In my view it’s a casino, the problem is economists and accountants tried to pretend it isn’t.

    When it comes to finding a better option you run into the question, how do you predict the future. Answer that and you have a solution.

  3. terje, i have just finished my mornings readings of the financials and am stunned by how bleak they look,
    what i wondered is, what are you reading to form the viewpoint you seem to have that the GFC was a hiccup and all is positive?

    if by some chance i have misunderstood your views, could you state them clearly so as to relieve me of my false apprehensions,

    and to stay on topic, i have considered it further and i think that zombie links of any kind are flogging a dead horse,
    i think you should try to find something that is at the front of ideas about all this rather than safely in the pack,

    Six decrees of speculation: An obituary

  4. how about

    Six imaginary habits of highly effective markets

    or making it five ideas

    The Famous Five: Five go to market

  5. But wait it gets much worse

    The six dead ideas that put the financial markets six feet under and fired a six shooter at the worlds economy

    (Time to go).

  6. For Alice who has a perceptual motor problem that involves me being not in a dead reckoning eyeball to eyeball level of understandings try… Joe Saluzzi of Themis Trading ,Google that,and have a look at the videos..I think, the Prof here covered it.

  7. Just had it clarified JQ – hubby thought your title is great and said “why would anyone change it? You couldnt do better than that.”

  8. @kiwilander
    For that model of a zombie attack – what was the conclusion? – hit hard and hit often to eradicate early!!! (doh). I am beginning to think some models are smarter than people.

  9. @Alice
    At the point of the DOW peak CNBC was going on about a 10 month inventory of housing in the USA, and were commenting on how more than this would be over-supply of the housing market. Perhaps the building slowed because supply was finally outstripping demand, rathern than anything to do with government, as some like to argue.

    JQ: The book title is memorable and specific enough to prompt people to leaf through it at the bookshop, I would think.

  10. JQ The suggested title is very Dan Brown(ish) – find something more worthy! You will end up with a market of two – Alice to fawn over it and Terja to burn it. Not a particularly discerning (efficient) market in either case!!
    Perhaps of more ‘feedback’ value is the lack of political sophistication shown eg by reference to “Reaganism”. One can accept you are an economist not a political scientist – but that is no excuse for sloppiness. The term ‘Reaganism’ has always encompassed foreign policy and social policiy in addition to economic policy. “Reaganomics” would be far more appropriate in this context, not to mention correct!! Interesingly the term ‘Thatcherism’ has generally been confined to economic policy within a small goverment framework. Perhaps this is pedantic but we all tend to make broader judgments based on perceived peripheral errors!

  11. 1.Perhaps a bit anglo?:
    – “Thatcherism in the United Kingdom, Reaganism in the United State, economic rationalism in Australia, the Washington Consensus in the developing world and “neoliberalism’ in academic discussions.”
    – “a global economy in which both households and nations lived far beyond their means.”-not in Singapore or France or China or Chile or Norway

    2″Commentators who were proclaiming, a year or two ago, that the business cycle had been tamed, and replaced by a Great Moderation in economic activity, have admitted their error”- I can’t help seeing a parallel between the Maestro Greenspan and the recent Rudd smugness over GDP in Australia to date.

  12. The EMH, IMHO, is flawed as a economic model that explains the actions of global markets. Such a model may be more relevant within the context of a family unit or the life of an individual were the decision maker is a single person or entity. Of course it may be the case that this individual entity is irrational in the global context but the decision of this entity clearly reflect the best decision for that entity at that point of time.

    So, when your into developing a one world global economic theory for everything I think a leaning to a mixed economy (with all sorts of hedging) is probably the best bet. One world economic management policies, in our largely irrational world is a tough call and one personally I think is unachievable without allowing the significant expression of indviduals choices.

    I personally don’t support one world economic management. It is destined to fail on the basis that our democratic bureaucracys lack sufficient mechanisms to express our indvidual choices in the most efficient way. I also oppose reduced freedoms in exchange for more autonomy and control under the banner of saving ourselves from ourselves.

    I think your choice of title is relevant. Our eonomic managers of the past behaved like zombies (dangerous, brainless twits in government/bureaucratic corporations), and that includes there economic ideas. But make sure your cure, the the social democratic model doesn’t end up a zombie as well, stifled by bureaucracy. It needs to be a fluid model capable of changing, this is difficult without the social/economic expression of individual choices. My views are clearly, largely libeterian and sometimes I come to the same conclusions as the social democrats do but for different reasons.

    I have noticed frequently on this blog heavy citicism (by some self proclaimed Social Democrat bloggers),of politicians and there politics. So i pose the question why support more of the same. Surely less government, wisely implemented limited governement role must be a better choice. More of the same just creates a bigger mess. Just reflect on your life experiences and you will notice the more you indulge anything, the more complicated and risky its consequences become.

    The proposed book title, from this capitalists point of view will work well. I assume your target audience is as many people as you can persuade to buy your book from all walks of life, you maximise your returns and in return inpart economic wisdom on the masses.I am looking forward to it. I’m sure I will cringe on some issues and agree on others, nevertheless its message is important for it critiques six economic ideas, that desperately need to be re-assessed hopefully by a wider and eventually more informed audience.

  13. @ennui
    “””Alice to fawn over it and Terja to burn it. Not a particularly discerning (efficient) market in either case!!”””

    Speak for yourself Ennui…!!

  14. Frankly – if JQ wants to sell books it shouldnt be too “academic” = ie it needs to appeal to people who are at the airport on their way to holidays, who dont want to buy a Patricia Cornwallor whatever is the latest fiction bestseller – who are a notch above that, interested in markets and educating themselves, but are not academic economists….

    It needs to appeal to a broader marketn ie its economics but needs to be able to communicate to a wider readership. JQs title and headings ARE JUST FINE for that.

    Id buy the book at the airport just as I usually buy books just like this at the airport. I want some depth bit not some prescriptive fiction. Nothing better for the sun lounge in Hawaii or anywhere else…a bit of stimulation in readable terms.

    A book for the chattering classes eh Terje?

    I reckon despite what Ennui says, I am right…!

  15. The subtitle elucidates the title perfectly. It can’t be improved on much, but using the word economics/economy twice is a bit inelegant. What about ‘Six Dead Ideas on the Rampage’.

    Having said this, I’m inclined to agree with Chris Warren. The whole title comes across as a bit tribal and dismissive — guaranteed to appeal to people of anti-market prejudice, but likely to deter readers of a laisser-faire bent who would otherwise give you a fair hearing. To give a reverse example: I might have learnt something from reading Coleman and Hagger’s ‘Exasperating Calculators’ book, but I was turned off by the subtitle — I felt as though I was being called names even before I’d opened the book. A more conciliatory title just might increase the average intelligence of the readership, if not the size.

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