Zombie Economics

One of the pleasures of writing a book is that you get to stuff into it all your favourite bits from others' writing that you figure other people should read. One that I put into The Economics Anti-Textbook (p.246) was Deepak Lal's "ideas -- good or bad -- never die in economics". I was reminded of this recently when, in Left Bank Books in St. Louis, I stumbled upon Zombie Economics: How Dead Ideas Still Walk Among Us (Princeton University Press, 2010), written by Australian economist John Quiggin (whose blog can be found here). He's also a contributor to the economics blog, Crooked Timber.

It would have been tempting to buy the book just for the brilliantly-designed cover, but (having read a third of the book so far) the contents are good too.
  The zombies that Quiggin attempts to put to rest once and for all are inter-related: the idea of 'The Great Moderation' (the alleged taming of the business cycle after the 1980s), the Efficient Markets Hypothesis and its implications, the Dynamic Stochastic General Equilibrium approach to macroeconomic modelling, apologies for growing economic inequality ('Trickle-Down Economics'), and the alleged benefits of privatization of public enterprises and services.
  Each chapter is structured so as to chronicle the birth, life, and (what should have been the) death of the idea and its later re-animation in zombie form by those who refuse to admit defeat. A final 'After the Zombies" section recaps the lessons that should be learned from the experience and points a sensible way forward. A 'further reading' section points the way to the relevant academic literature.
  The book is written in a lucid and non-technical way and should be intelligible to upper-level undergraduates who have had the standard intermediate theory courses. Highly recommended!

RH

The empty world assumption

We mention all-too-briefly in The Economics Anti-Textbook the implicit 'empty world' assumption that underlies much of the simple economics presented to students. (See the quote at the beginning of Chapter 7.) Non-renewable resources get little attention as do serious environmental problems. There are no limits to growth -- a technological fix or an innovation spurred on by price signals can be relied upon to get us out of any jams.

  I was reminded of this attitude when I read the text of a recent talk give by Naomi Klein at TED. It's worth reading, but  I find her characterization of economists "mechanistic thinking" on the question of climate change a bit unfair. She doesn't cite anyone, so it's hard to be sure who or what she has in mind, but the best work -- like that of Nicholas Stern or Martin Weitzman -- is hardly "mechanistic" but gives a central role to the huge risks involved.

"Inside Job" -- the movie

I wish I could say, as Paul Krugman does today in his blog, that I'd been able to see the new documentary Inside Job about what led to the crash of 2008 and who was involved, but where I live the 'free market' (in the form of a monopoly that owns all the movie theatres) for some mysterious reason prefers to show only the most mindless Hollywood trash, the current opiate of the masses.

  It seems the movie is less than flattering about the role some economists have played. Krugman comments:

OK, about the economist-bashing: I thought it was basically fair. There aren’t, I think, all that many cases when economists are literally paid to offer a specific opinion — although Greenspan’s defense of Keating qualifies. But the movie didn’t say there are. What it suggested, instead, was a kind of soft corruption: you get paid a lot of money by the financial industry, you get put on boards, but only if you don’t rock the boat too much. Besides, you hang out with these people, and get assimilated by the financial Borg. I think all of that is very true.

I like that idea of "soft corruption". Is this what goes on in the textbook market too? A successful author is paid a lot of money, "but only if you don't rock the boat too much". In contrast to his kick-ass columns for the Times and his blog, Paul Krugman's own introductory text doesn't rock the boat any more than average. (I haven't seen the second US edition, but I'd be shocked if it gave any reader even a twinge of seasickness.)
   His second point -- the intellectual assimilation that takes place from hanging out with people -- is an almost inevitable by-product of our make-up as social animals. A few resist it, but not many. I certainly didn't when I was an economics student...

RH