Debunking Economics by Steve Keen

Title: Debunking Economics
by Steve Keen

Chapter 2.

After the turmoil of the. The late 1960s the recession of the early 1990s, economists have finally worked out how to deliver economic nirvana.  To do so, they rejected many of the concepts that had been introduced into economics by the 'Keynesian revolution' in 1930s.

The resulting theory of economics was called Neoclassical Economics, to distinguish it from the 'Keynesian economics' it had overthrown (though in a confusing twist, major subgroup within neoclassical economics called itself “New Keynesianism”). In many ways, it was a return to the approach to economics that had been dominant prior to Keynes, and for that reason it was often referred to as 'the Neoclassical Counter -Revolution.'

A practical level, neoclassical economics advocated reducing government intervention in the economy letting markets–especially finance markets–site economic outcomes unimpeded by politicians, bureaucrats or regulations. Counter-cyclical government budget policy–running deficits during downturns and surpluses during booms–gave way to trying to run surpluses all the time, to reduce the size of the government sector. The only policy tool in favor was manipulation of the interest rate–by a politically independent central bank which itself was controlled by neoclassical economists–but the objective of controlling the rate of inflation.

At a deep theoretical level, neoclassical economics replace many tools it seems that   Keynes and his supporters had developed to analyze the economy as a whole (“macro economics”) with their own tools. Unlike the analytic tools of Keynesian macroeconomics, the new neoclassical macroeconomists toolset was dry correctly from microeconomics–the theory of how the individual agents in economy behave.

The Purge:

In teaching, core courses in microeconomics, macroeconomics financial person non-neoclassical ideas. The new pod non-neoclassical course continued his option to give dissenter something to do, but generally, non-neoclassical staff so that most of your teaching time giving tutorials and subjects that taught neoclassical ideas with which they fundamentally disagreed. They toed the line intuition and marketing–though they would occasionally grumble about it, to encourage dissent students who seem more critical than the run-of-the-mill.

In research, the purge was more complete, because neoclassical editors and referees could exclude the dissidents from the journals they edited...

Non-neoclassical economists in general gave up on the citadels orthodoxy and instead establish their own journals in which to communicate with each other, and vigorously criticize neoclassical theory....

In public policy, as in the most prestigious journals, neoclassical economics reigned supreme. Few dissidents were ever appointed to positions of public influence, and most bureaucratic positions were filled by graduates from the better colleges who-because of the purging of non-neoclassical ideas from the core curriculum-generally didn't even know that any other way of thinking about economics was possible. To them, neoclassical economics was economics. (8-9)–

-------------------
Chapter 2

Modern-day economics students are insufficiently literate because economic education eschews the study of the history of economic thought... Understanding this literature in its raw form requires an appreciation of some quite difficult areas of mathematics–concepts which require up to 2 years of undergraduate mathematical training to understand.... most economists do not have this level of mathematical education.



Instead, most economists learn mathematics by attending courses in mathematics given by other economists. ... The side effect that economics has produce its own peculiar versions of mathematics and statistics, and has persevered with mathematical methods which professional mathematicians have long ago transcended. This dated version of mathematics shield students from new developments in mathematics back, incidentally, undermine much of economic theory.



One example of this is the way economists have reacted to “Chaos theory”. Most economists think that Chaos theory has had little or no impact--which is generally true economics but not at all true in most other sciences. This is partially because, to understand Chaos theory, To understand area of mathematics known as ordinary differential equations. If this topic is taught in few courses on mathematical economics--and where it is taught, it is not covered in sufficient depth. Students may learn some of the basic techniques for handling what are known as “second-order linear differential equations,” but chaos in complex begins to manifest themselves only in "third order nonlinear differential equations”.

Economics students therefore graduate from Masters and PhD programs with an uncritical and unjustified belief that the foundations of economic analysis are sound, no appreciation of the intellectual history of your discipline, and an approach to mathematics which hobbles both a critical understanding of economics, and the ability to appreciate the latest advances in mathematics and other sciences. 21

Don't overrate sincerity: one of my teachers once said “Don't overrate sincerity. The most sincere person you'll ever meet is the media chase you down the street with ax, trying to chop your head off!" 25's once I heard in


------------------
Chapter 10

Marx rejected Say' s initial proposition that “every producer asked for money in exchange for its products, only for the purpose of warning back funny again immediately in the purchase of another product”. Instead, Marx pointed out that this notion asserted that no one in a market economy wish to accumulate wealth. If there was never any difference between the value of commodities somewhat bizarre to sell and buyer the market, but no one would ever desire to accumulate wealth. But essential feature of capitalism is the existence of a group of agents with precisely that attention.

Believers in Sage principle of walruses law might find these agents rather bizarre, since in their terms these agents are thieves, who wish to take more than they give. However, far from being bizarre these agents earn essential part of a market economy they are known as capitalists. 215