Table of Contents

Created by: gwideman, Dec 28, 2011 12:38 am
Revised by: gwideman, Dec 28, 2011 3:24 am (3 revisions)

Notes on the book Debunking Economics by Steve Keen

Chapters and Summaries

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Predicting the 'unpredictable'
The crisis that began in 2007 was not an unpredictable event, but an inevitable one caused by excessive debt-financed speculation. This chapter consists of extracts from the 1st edition, published in 2001, predicting the crisis we are now in.
No more Mr Nice Guy
As an academic discipline, Economics is incredibly resistant to change. Despite the failure of the vast majority of neoclassically-trained economists to foresee the crisis, the Neoclassical School will remain dominant unless public pressure forces change.
Part 1 Foundations: the logical flaws in the key concepts of conventional economics
The calculus of hedonism
The vision of a downward sloping “demand curve” intersecting an upward sloping “supply curve”is iconic in economics, yet Neoclassical economists long ago proved that the market demand curve can have any shape at all. The demand half of Neoclassical economics is therefore invalid.
Size does matter
The Neoclassical mantra that “profit is maximized by equating marginal cost and marginal revenue” is provably false. The “supply curve” doesn’t exist.
The price of everything and the value of nothing
The Neoclassical belief that costs of production rise as output rises is empirically false.
To each according to his contribution
Income distribution is determined not by merit but by relative bargaining power.
Part 2 Complexities: issues omitted from standard courses that should be part of an education in economics
The holy war over capital
The Neoclassical model of production is a fallacy, as was conceded by Paul Samuelson decades ago.
There is madness in their method
Friedman’s argument that “assumptions don’t matter” has allowed Neoclassical economists to develop absurd theories. His defence that a theory should only be judged on the accuracy of its predictions is a good reason to reject Neoclassical economics today, after its failure to predict the economic crisis that began in 2007.
Let's do the Time Warp again
Neoclassical economics has an infantile approach to dynamics.
Why they didn't see it coming
As even as staunch a Neoclassical economist as Robert Solow said about modern Neoclassical macroeconomics, “How could anyone expect a sensible short-to-medium-run macroeconomics to come out of that set-up?”
The price is not right
The Neoclassical model of finance, known as CAPM (Capital Asset Pricing Model), starts from the assumptions that all investors agree about the future, and that their predictions will come true. No wonder it fails to see financial crises coming!
Misunderstanding the Great Depression and the Great Recession
Ben Bernanke is not an expert on the Great Depression.
Part 3 Alternatives: different ways to think about economics
Why I did see "It" coming
Minsky’s “Financial Instability Hypothesis” explains how capitalism periodically gets trapped in financial crises. From 1993 on, all the signs were there that a major one was long overdue.
A monetary model of capitalism
Capitalism is a monetary system, and must be modelled as such. I outline my model of a pure credit economy.
Why stock markets crash
Neoclassical theory portrays financial markets as always in equilibrium, or tending towards it. There are many sound alternative models that explain why Stock Markets are always far from equilibrium, and why they periodically crash.
Don't shoot me, I'm only the piano
Mathematics is not the cause of the failures of economics. Instead, Neoclassical economists have used inappropriate mathematical techniques, sometimes made outright mathematical errors, and have dressed up absurd assumptions in mathematical form.
Nothing to lose but their minds
The so-called followers of Marx have actually preserved his worst mistakes, while ignoring advances he made to Classical economics because they undermine the case for socialism.
There are alternatives
There are many other Schools of thought within economics in addition to Neoclassical economics. This chapter gives a brief overview of the major alternatives.