Wednesday, June 08, 2011

Buy This Book and Discuss it on Lost Legacy

I posted earlier this week (Saturday) news of a “New Book Exposes Modern Economics to Scrutiny” written by
Yanis Varoufakis, Joseph Halevi, Nicholas J. Theocarakis,
details HERE

I was rereading the authors’ summary today and was struck again by its potential importance as a critique of modern economic theory as taught on most campuses and used as a competence test in recruitment of new faculty and promotion thereafter.

I have expressed my own scepticism about the state of economic teaching and, worse, of the advice that economists declare as ‘gospel’ that people and their governments must accept. The fact that exponents of modern economics argue so much about the advice that any of them give, should ring some bells of concern, if not outright ribaldry of the lot of them.

The profession, however, continues in it complacent arrogance unabashed, doling out prizes and tenure (a wholly pernicious self-employment guarantee not warded to any other group of employees) to no doubt many worthy applicants (many of whom are good friends and colleagues).

So this new book by Yanis Varoufakis, Joseph Halevi, and Nicholas J. Theocarakis from Amazon is on order for me to read. I shall report on it in due course on Lost Legacy.

Any reader who has read it is welcome to offer their views, for or against it themes for publication on Lost Legacy (authors keep their copyrights).


Blogger Paul Walker said...

The book seems to worry about Nash-Debreu-Arrow general equilibrium. Now I'm not sure what Nash in doing in that group but as to Debreu-Arrow GE I have to ask, How important is it to economics today? I mean when you look at modern development in econ - applications of non-cooperative game theory, incentive theory, contracts theory, new institutional economics etc - all this work involves partial equilibrium models not GE. On Debreu’s influence today Till Duppe writes, “from the point of view of today Debreu’s influence on the body of economics could be called zero, in that general equilibrium theory (GET) is the economics of yesterday.” If they really are worried about GE then they are worried about the economics of the 1950s and 60s.

And statements like this I find strange,

"Less well known is the role in all this of the Bubble‘s strongest ally: the Econobubble, a frothing of economic theory founded on the certainties of free market faith and propagated by the dynamics of formalist neoclassical economics which took hold in 1950 and came into their own during the time of the Global Minotaur (see Chapter 11).

Now, after the world’s governments took it upon themselves to save the financial sector, and transferred the immense costs of the bail outs to those who lack the clout to be bailed out themselves, the Econobubble is returning. With no compunction, the same theorists who proclaimed the end of capitalist crises prior to 2008, and a new paradigm of perpetual growth (guaranteed by unregulated markets where everything is privatised), are now the authorities which propose to ‘explain’ to the masses… the Crash of 2008."

I don't know what world these guys are in but the problem of 2008 has nothing to do with faith in free market, the opposite in fact. Governments have not saved the financial sector, they have just made worse a problem they created in the first place.

9:35 pm  
Blogger Gavin Kennedy said...


As I have not yet read the book - and may not receive it from Amazon until 2 July (also, I leave for France for Edinburgh that afternoon) so, I cannot answer your question just yet.

Debrue and others have been quoted as saying GE 'gave analytical rigour to Adam Smith's theory of the invisible hand', which is a nonsense - he never had such a theory, though Samuelson claimed he had (1948) and it is now widely believed.

The idea of the 'best outcomes' from the 'IH of the market' permeates high economic theory and, sadly, lower political policy, which were behind the 'deregulation of banking' and 'we have abolished boom and slump' cycles (Brown).

I have always suspected any equilibrium theory, partial and general (except when teaching the syllabus). Now from the reports this book challenges these theories and it is this that has aroused my curiousity. I am happy that new developments have moved away a little from the old certainties, but having tied Adam Smith them, he goes down with them.

It is to the prevention of that end that I interested in what they have to say.


9:31 am  

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