Sunday, June 02, 2013

New Book of Immediate Relevance to Adam Smith and Classical Economics

The Rediscovery of Classical Economics: adaptation, complexity and growth”, David Simpson, 2013. Edward Elgar, Cheltenham, England and Northampton, MA, USA.   It is no. 8 in the “New Thinking in Political Economy series, published in association with the Institute of Economic Affairs”.
David Simpson, now retired, was formerly Professor of Economics at the University of Strathclyde, Glasgow, Scotland.
David Simpson skilfully argues that a market economy can best be understood as a human complex system, a perspective that represents a continuation of the classical tradition in economic thought.  In the classical tradition, growth rather than allocative efficiency is the principal object of enquiry, economic phenomena are recognised to be elements of processes rather than structures, and change is evolutionary.     
David Simpson shows the common principles that connect the early classical school, the Austrian School and complexity theory in a single line of thought.  It goes on to show that these principles can be applied to explain the characteristic features of a market economy – namely incessant change, growth, the business cycle and the market process itself – and argues that static equilibrium theory, whether neoclassical or neo-Keynesian, cannot satisfactorily account for these phenomena.”
I have read the first 4 chapters so far and I am overwhelmed by the clarity of the extent to which I agree with so much of it and have expressed it so inadequately on Lost Legacy since 2005.  David Simpson shows what economics is really about and how economies across the world correspond to the central tenets of classical economics and not to the two-dimensional models of neoclassical “equilibrium” and “Homo economicus” of complex human behaviours. 
I defy any neoclassical theorist to read David Simpson’s book and continue to see their teaching of neoclassical theories as showing how real life market economies and have relevance to the real world as it is and how it evolved within the paradigm they have invested so much effort in acquiring their professional competences. 
In this context, I suggest they pause and reflect on what they teach and advise others to do to function in the modern market places of life, given that in the real world their theories fall well short of explaining key entrepreneurial roles, innovation, increasing returns, and the “perennial gale of creative destruction”.
I shall compose a review of David Simpson’s “Rediscovery of Classical Economics” for Lost Legacy.  Meanwhile, read it for yourself as soon as you can get a copy for your department’s library.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       


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