In “Seven Bad Ideas: How Mainstream Economists Have Damaged
America and the World,” New York Times economic analyst Jeff Madrick cuts
economics down. He says classical economists are the criminals of the 2008
financial crisis and the following major recession.
The book invokes Milton Friedman’s principle of laissez-faire
from a Keynesian point of view.
It obstinately repudiates Adam Smith, Alfred Marshall, Léon Walras, Vilfredo Pareto, David Ricardo, John Stuart Mill, Milton Friedman, Paul Samuelson, Kenneth Joseph Arrow, Robert Lucas Jr., and other great men, as well as those I learned about through textbooks such as Irving Fisher and Rudi Dornbusch, without considering their arguments. It feels like drinking strong prohibited alcohol.
He calmly explains how Presidents Nixon, Reagan, Clinton, Bush, and Obama, as well as Federal Reserve Board members Paul Volcker, Alan Greenspan, and Ben Bernanke went wrong through the fault of economic doctrine (especially that of Friedman). He also concludes that Thatcher’s privatization and Reagan’s deregulation were blunders in the long term. It is incredible.
He also criticizes globalization. He determines that the reason wealthy countries advanced was not tariff repealment, government nonintervention and floating rate exchange systems; rather, it was high tariffs, government investment in industry, and fixed currency value. The TPP was settled at great pains, but how should this be untangled?
His criticism of economics as a science is invigorating. The substantiation of economics does not reach the standards required to be a true science. Even if results exactly the opposite of those predicted arise in the real world, there is an escape route. Physics theories change in response to experimentation and analysis, but economics does not do so. In short, it is not a science. Even if economists make mistakes, it does not harm their reputation, he argues.
It obstinately repudiates Adam Smith, Alfred Marshall, Léon Walras, Vilfredo Pareto, David Ricardo, John Stuart Mill, Milton Friedman, Paul Samuelson, Kenneth Joseph Arrow, Robert Lucas Jr., and other great men, as well as those I learned about through textbooks such as Irving Fisher and Rudi Dornbusch, without considering their arguments. It feels like drinking strong prohibited alcohol.
He calmly explains how Presidents Nixon, Reagan, Clinton, Bush, and Obama, as well as Federal Reserve Board members Paul Volcker, Alan Greenspan, and Ben Bernanke went wrong through the fault of economic doctrine (especially that of Friedman). He also concludes that Thatcher’s privatization and Reagan’s deregulation were blunders in the long term. It is incredible.
He also criticizes globalization. He determines that the reason wealthy countries advanced was not tariff repealment, government nonintervention and floating rate exchange systems; rather, it was high tariffs, government investment in industry, and fixed currency value. The TPP was settled at great pains, but how should this be untangled?
His criticism of economics as a science is invigorating. The substantiation of economics does not reach the standards required to be a true science. Even if results exactly the opposite of those predicted arise in the real world, there is an escape route. Physics theories change in response to experimentation and analysis, but economics does not do so. In short, it is not a science. Even if economists make mistakes, it does not harm their reputation, he argues.
There are surely
criticisms to be made of this book from neoclassisist, montarist, and Marxist
views, as well as from linear rational expectation schools of thought. If so,
it seems the book would have persuasive power. Yet I think its instability
cannot be readily handled. I graduated from an economics school, but if you are
not at home in that environment, you will become disoriented.
I pray for the active efforts of all the world’s economists.
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