Bookblogging: The end

Over the fold, the conclusion of my book, with Release Candidate title “Zombie Economics: How Dead Ideas Still Walk Among Us”. I plan a proper post on the whole bookblogging experience, but until then, I’ll thank everyone who’s commented, or just read this exercise with interest and make one (maybe) last request for help. Can anyone recommend a book on Thatcher’s economic reforms that would be a good suggestion for further reading? I’m currently suggesting Anderew Glyn’s Capitalism Unleashed, but I’d like to add something from a centrist or Thatcherite perspective, as long as it’s readable and not too objectionable for words.


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Conclusion: Economics for the 21st Century

The zombies of horror movies are famously hard to stop. Being already dead, they can absorb all kinds of damage and keep lumbering onwards towards their targets. The zombie ideas discussed in this book are similarly resilient. Throughout the crisis, the economics profession carried on, for the most part, as if nothing had changed. And now that the immediate crisis has passed, market liberals are trying to pretend that it never happened. As Richard Posner, a rare example of a market liberal who has changed his views and embraced Keynesianism observed in a recent interview ‘market correctives work very slowly in dealing with academic markets. Professors have tenure. They have lots of graduate students in the pipeline who need to get their Ph.D.s. They have techniques that they know and are comfortable with. It takes a great deal to drive them out of their accustomed way of doing business.’

An approach to economics that has been dominant for more than three decades will not go away simply because its predictions are inconsistent with the facts. It is necessary to provide an alternative to the zombie economics of market liberalism.

Some suggestions about the way forward have been offered in this book. They can be summed up by three simple propositions. In the 21st century, economics should focus:

* More on realism, less on rigor

* More on equity, less on efficiency

* More on humility, less on hubris

The prevailing emphasis on logical rigor has given economics an internal consistency that is missing in other social science. But there is little value in being consistently wrong. Economics must move on from the infinitely rational, farsighted and asocial beings whose decisions have been the central topic of analysis in recent decades. It will still be necessary to abstract from the messy complexity of human decision processes and focus on critical factors in decisionmaking. But the factors that are relevant in microeconomic analysis of goods markets may not be the same as that matter in labor markets or in analysis of macroeconomic aggregates.

Three decades in which market liberals have pushed policies based on ideas of efficiency and claims about the efficiency of financial markets have not produced much in the way of improved economic performance, but they have led to drastic increases in inequality, particularly in the English-speaking world. Economists need to return their attention to policies that will generate a more equitable distribution of income.

Finally, with the collapse of yet another economic ‘New Era’ it is time for the economics profession to display some humility. More than two centuries after Adam Smith, economists have to admit the force of Socrates’ observation that “The wisest man is he who knows that he knows nothing”.  While knowledge in the sense of absolute certainty may be unattainable, economists can still contribute to a better understanding of the strengths and weaknesses of markets, firms and other forms of economic organization, and the possibilities for policy action to yield improved economic and social outcomes.

Every crisis is an opportunity. The global financial crisis gives the economics profession the chance to bury the zombie ideas that led the world into crisis, and to produce more realistic, humble and above all socially useful body of thought.

16 thoughts on “Bookblogging: The end

  1. “Thinking the Unthinkable: Think-Tanks and the Economic Counter-Revolution 1931-1983” by Richard Cockett could be worth a read, although I imagine you have probably read it.

    The book is well written. It just provides the history of the development and promotion through various think tanks of the policies that Thatcher (and Reagan) ended up adopting and running with. The book has a British focus. It wasn’t clear when I read it whether the author approved or disapproved of the policies or the surreptitious history related in the book (of how the advocates and think tanks tried and succeeded in influencing policy without their ideas going through the normal democratic scrutiny that other policies usually go through). That it wasn’t clear what the authors views are I thought might be an indication of balance.

    Published in 1995

    Product Description
    There is another modern British history – an alternative tradition in our government, politics and economics. It is a history kept rather quiet, a tradition largely hidden from view – suspiciously well hidden, some would say. Thatcher seemed to hit Britain like a thunderbolt from the blue, but her ideas, her policies, her strategies and her vision had all been forged long before she ever arrived at Downing Street. They were first contrived by the anti-Keynesian economist, Friedrich Hayek, the man whose writings inspired Thatcher in all she did. He and his followers began, after World War II, the difficult and uphill task of countering the rise of socialistic collectivism. They were the economic liberals. Among their shock troops, their vanguard of revolutionaries, were Milton Friedman, Alan Walters, Keith Joseph, Ralph Harris, Alfred Sherman, John Biffen and Geoffrey Howe. Theirs was a long, gruelling fight, but in the mid-1970s, they found their ideal secret weapon. Within five years that weapon was running the country, and the rest is history, retold here in a new way.

  2. I just had a title thought; I’m not sure how good it is.

    Zombie Economics: Dead Ideas still animating many economists.

    This, appropriately, turns the followers of these ideas into Zombies.

  3. The closest thing I’ve to a “centrist” (that is, 90s “end of history” centrist) perspective would be Stanislaw and Yergin’s “Commanding Heights”, which was made into a PBS TV series. It’s “readable” although fairly blatant propaganda, written in 1998 at the height of neoliberal triumphalism. Which makes it interesting from a history-of-thought perspective.

  4. This conclusion is good JQ. Its actually good to see someone honestly raise the elephant in the room of rising inequality in many countries over the past few decades tell us how many people in economics schools are there in Australia, currently looking at the problem ogf rising inequality? I know of one who was but someone who was but for some strange reason turned his CV into something stochastic to do with labour markets.

    Why??? – because obviously the poor chap thought it would be frowned on. I was studying it and got told “its a zero sum game.” Why dont you also mention that the zombies mounted and continued a campaign to ensure that the study of inequality and rising inequality (and other things like poverty) werent on the zombie’s lists of “acceptable study”. As far back as the 1970s Frank Cowell, suggested in a book review on a british academic who had examined inequality in an income distribution that went something like this “this is a wonderful book but you may want to wrap it in brown paper before you read it.”

    Those who control economics schools thought they could “mind control” the problem of growing inequality away. Its not and it never was, a zero sum game. Time to rip the brown paper off the inequality matter, which is real, and also time to rip the shiny paper off the emphasis on maths software systems, the use of which is often a mere automated trick (load data in – dont question assumptions – press same buttons) without any genuine sense of economic enquiry behind it. Monkey see, monkey do.

  5. There is also a very good reason why policies and initiatives by governments that rectify rising inequality are not a “zero sum game”. Governments shouldnt stand back and allow policies that strip the APC of the poor and increasingly the middle and redirect it to the rich to trickle it back down, to prevail.

    Now that we know that trickle down theory has proved a dismal failure, the question also needs asking as to why goverments should ever have considered overrewarding the rich in th first place (effectively employing them to be indirect policy distributors under “trickle down” assumptions) when the government can directly arrange any redistribution faster and more efficiently, which is of much greater benefit to the economy.

    An entirely false economy.

  6. It looks like it is going to be a terrific book. But I suspect it would be an even better book if it was the result of bitter disputation with other smart people who tend to think differently to you.

    Imagine if you were fighting over each chapter with Ergas? Imagine if the fighting ever died down you brought me into it just to bring the heatedness up to a new pitch again? This sort of thing can be productive if handled well I would reckon.

    In any case I support this project and I’m sure it will be a more than usually stimulating addition to the Australian economics scene. Clearly an institution that needs a whole lot of shaking up.

  7. Graeme – your recent civility is making me nervous. I’m wondering if maybe somebody has stolen your online identity and that the real you is currently tied up in the boot of somebodies car. I may have to start with the personal questions that only the real Graeme Bird could answer just as a test.

  8. Did Samuel Gregg write any relevant books that could be of help? He seems broadly Thatcherite but seems capable of keeping his temper, is widely acclaimed, doesn’t view life as one vast Hobbesian fantasy with no holds barred, and might be worth consulting.

  9. What about the work of John Gray on the 80s – as a conservative green critical of both new right and new left? I’m thinking in particular of “Beyond the New Right”.

  10. As Posner sort of says, dead ideas can persist indefinitely in academic economics, for there are no rewards for being right about how the economy works and no penalties for being wrong. The rewards in academic economics go to those who are methodologically innovative. If you are wrong but in an innovative way you will be promoted and feted. If you are really innovative you might even win a Nobel Prize even if everything you have said and written about how economies work, even in abstract, is a nonsense. If you are right but unoriginal your career will languish. If you show an inordinate interest in how an actual economy works you will be dismissed by your peers and promotion committees as superficial and, in the ultimate insult, as a journalist.

    In this environment schools of thought which are simply wrong can persist forever. Economics departments which have been colonized by these schools of thought also persist forever. They keep rehiring in their own image, and the students who don’t know any better keep on coming.

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